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: 2008-09-22 09:12 pm (UTC)Sorry to intrude, but ... I thought you might like to hear something from the *other* side of the argument. Given that I *work* for an energy company ... !!
[All of this is, of course, unofficial, and I'm speaking from my own viewpoint and not as a representative of any particular energy company :p]
First thing to say is that, yes, undoubtedly, energy companies make money. Oodles of it - and after all that's kind of their raison d'etre (they *are* private businesses after all). However, and this is a very important point, all energy companies are (and have to be) subdivided so that their trading arms do not deal directly with their retail arms (to prevent issues of Leeson-esque proportions). In general terms, it is the *trading* arms that make all the money, not the end-retail arm. Indeed the domestic retail side of the firm I work for regularly makes a *loss*.
Since it's the retail side in charge of prices, it's pretty clear that prices actually aren't as high as they ought to be for retail to make money!
That said, much of this is caused by issues outwith the *markets*, and more to do with eg unbilled accounts, old debt, incorrect billing, some of which is our fault and some of which is National Grid Transco's.
In addition, the major issue with a windfall tax is that, with their other hand, the government is requiring energy companies to invest in 'green energy' schemes - the nature of which means they are expensive. So by imposing a windfall tax, the government is taking away much of the cash that would be used to finance such schemes, which would leave energy companies no option but to revert to 'cheaper' forms of energy production - ie ones that already exist; coal, gas, etc.
[The whole 'green energy' is a complete joke btw, and only a directed effort by the government will change that. Otherwise all the energy companies will simply pay lip-service to the regulations and continue to trade in 'carbon certificates' rather than actually producing any *real* green energy!]