A rant about windfall taxes...
Sep. 7th, 2008 08:18 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
rhythmaningThere has been a lot of talk over the past few months about the need (or otherwise) of the UK government to charge the energy companies – electricity, gas and oil – with a windfall tax.
Labour MPs, unions and even 70% of the public support such a tax (sorry – I can’t find the reference).
I really don’t understand this at all.
The argument goes that a windfall tax is needed because the energy companies are making excess profits: that is, they are profiting from unfair market practices – they either represent an oligolopoly or, locally, a monopoly.
The electricity and gas companies – privatised in the 1980s and 1990s – are regulated by the Office of Gas and Electricity markets – Ofgem. If any energy companies are abusing their market position, they should be subject to sanction by Ofgem, the Office of Fair Trading - “making markets work well for consumers” (I mean, jeez! It’s their bloody job!) or the Competition Commission.
That’s right – there are three different regulatory bodies who have the power to investigate market abuse by energy companies.
If MPs or the unions believe the energy companies are profiting from excess prices because the energy retail or wholesale markets aren’t working properly, they have lots of ways of prompting an investigation – which would result in large fines.
As it is, these companies are making large profits at the moment. (I have no idea if these are excessive or not.) As a result, they pay a large amount of money in corporation tax – this is a good thing: it pays for hospitals and schools and lots of other things we need money for in society.
This is a very different argument to saying that energy prices are high, and many people may need help to pay their bills this coming winter. This is something MPs and unions can do something about. Indeed, looking after their constituents is what they should be about. But they don’t need to bash businesses whilst they are about it.
Labour MPs, unions and even 70% of the public support such a tax (sorry – I can’t find the reference).
I really don’t understand this at all.
The argument goes that a windfall tax is needed because the energy companies are making excess profits: that is, they are profiting from unfair market practices – they either represent an oligolopoly or, locally, a monopoly.
The electricity and gas companies – privatised in the 1980s and 1990s – are regulated by the Office of Gas and Electricity markets – Ofgem. If any energy companies are abusing their market position, they should be subject to sanction by Ofgem, the Office of Fair Trading - “making markets work well for consumers” (I mean, jeez! It’s their bloody job!) or the Competition Commission.
That’s right – there are three different regulatory bodies who have the power to investigate market abuse by energy companies.
If MPs or the unions believe the energy companies are profiting from excess prices because the energy retail or wholesale markets aren’t working properly, they have lots of ways of prompting an investigation – which would result in large fines.
As it is, these companies are making large profits at the moment. (I have no idea if these are excessive or not.) As a result, they pay a large amount of money in corporation tax – this is a good thing: it pays for hospitals and schools and lots of other things we need money for in society.
This is a very different argument to saying that energy prices are high, and many people may need help to pay their bills this coming winter. This is something MPs and unions can do something about. Indeed, looking after their constituents is what they should be about. But they don’t need to bash businesses whilst they are about it.
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no subject
Date: 2008-09-10 10:03 am (UTC)Targetting a single type of company or a single part society is unjust. It is a short step to targetting Jew or "foreigners" or the old or women or ...
no subject
Date: 2008-09-10 09:32 pm (UTC)Just as no financial institution can be excused to not forseeing the stock market issues that they've experienced, no energy company can be excused for not making provision for the day that oil prices would go through the roof.
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Date: 2008-09-22 09:16 pm (UTC)Er, indeed. That's why Energy Traders and Energy Risk Analysts get paid so much money :p And the clue is in the job title ... *Risk* analysts. It's their job to minimise it. And if oil prices (which everything else is linked to) can be seen to steadily rise, constantly, it's not exactly a difficult leap of faith to imagine them to continue to so so, and therefore try to get as much energy bought on long-term contracts as physically possible.
Or to put it another way, if you knew for eaxmple in 2004 that prices would double by 2008, you'd buy enough energy *then* for future contracts (at 2004 prices) thus mitigating any medium-term price rises (of course if prices rise constantly and rapidly for a decade then at some point there'll be a catch-up, but, er, they haven't!).