Rumour has it that Rishi Sunak is planning a windfall tax on energy companies to supposedly address the so-called cost of living crisis, after all. Perhaps pressure from Labour has worked.
I would entirely agree that a windfall tax on the excess profits that energy companies will make is required. As a matter of fact a war should not be exploited to profit some in society at cost to most, including at the risk of destitution for many.
However, let's be clear, unless the tax was capable of being clinically targeted on the precise excess profits earned and be at the rate of 100% on those excess profits a windfall tax cannot be used as the basis for the redistribution of those gains back to those who will suffer from rising energy costs. Since clinically identifying precise profits arising is impossible, and I have a feeling this additional tax will be at a rate well below 100% I think we can safely conclude two things. One is that companies and their shareholders will get away with this. Income in society will be redistributed upwards as a result. And second, if the government says this tax will fund a compensation fund the money made available will be hopelessly inadequate for that task.
In addition, this tax will take considerable time to enact and implement. Recovery will take even longer. So whilst I approve of seeking to reprice oil and gas using this mechanism it is not (as is always the case) a tax to fund anything. It is merely a tool to reduce market failure by repricing.
In that case this is not an answer to the problem facing many UK households, and it will not fund doing so. We need a blunt recognition that only turning on the government's ability to create money can solve the crisis we face. And Labour is in the same boat as the Tories (yet again) in refusing to do this. The result is that millions will suffer because our leading political parties are all dedicated to balancing government's books rather than ensuring that people are warm, fed and housed.
It's hard not to despair on occasion.
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Once again Rishi Sunak is dragged kicking and screaming to accept the inevitable.
Recall that, whilst the media claims that furlough was a triumph for the Chancellor, the truth is that his first three goes at a COVID support package were useless – furlough was the result of failure, not a stroke of brilliance….. and so it is with the energy price crisis.
The consequences of this are (a) it will be poorly planned/executed because it is being introduced in a rush (b) half-arsed because his heart is not in it and (c) its limited revenue raising will be used as an excuse for limiting help to poor households.
You are right, it is hard not to despair….. BUT DON’T!!
Hear, hear on your last paragraph in particular.
Judging by how far I’ve got with Perry Mehrling last night, there is no excuse for not using the central bank (the Bank of England) to address this issue. Although I would also have advocated you last para without reading Mehrling from a moral standpoint, he certainly seems to have asserted the intellectual and practical justification for CB intervention in the most neutral and matter of fact way imaginable.
This ploy by Sunak will not “solve” the energy price crisis. The only effective measure is to take public control of the gas, electricity and oil companies and to reduce our dependence on fossil fuels by massive investment in insulation and renewable energy if we are to survive both ecologically and financially.
Well said Bill, some fundamental changes are needed otherwise we’re falling into Einstein’s definition of madness!
This government already satisfies his definition. Especially its head.
…all facilitated by a properly functioning central bank.
I have been advocating the nationalization of the utility companies while running them more professionally than they had been previously for a while. So, I am 100% behind you. And with the proper government support, though probably not this one, a green agenda should be more than simply doable.
I’m afraid that until we have a more well versed, less stupid, population we will continue to have the crass idiocy of the electorate that we now have.