Taxing times for energy companies

 

The suggestion that the government shouldĀ  impose a windfall tax on energy companies may be attractive to some at a time when energy companies are far from popular. It would be revenge for their price hikes, when many are feeling the pinch as a result.

Sir John Major is right to say that Conservatives need to show concern for people on low incomes andĀ benefit incomes who feel the squeeze from high energy prices more keenly than those on higher incomes.

However, a one off tax rise to provide some additional one off help to people on tight budgets does not go to the heart of the problem. The following year after the windfall tax energy prices might be just as high or higher. The underlying problem, dear energy, Ā has to be addressed.

Nor does it make any sense to say to Conservatives we need to concentrate on bread and butter issues like jobs, incomes and prices, and turn aside from consideration of our relationship with the EU. It is the relationship with the EU that is causing the disruption of family budgets.

In this case of energy we needĀ  the EU to suspend or repeal its renwables requirement. Demanding that we generate a rising proportion of our electricity from renewables is forcing the cost of energy up. The EU needs to suspend or amend its Large Plants Directive. Then we could run our older power stations for longer, saving us a lot of cost, keeping energy prices lower, and delaying the need to spend large sums on replacing them with something dearer.

In Sir John’s day arguments over Europe were not some abstruse diversion from the politics of jobs, incomes and daily life. They were then about how high interest rates had to go and how high they had to stay. The ERM he took us into didĀ  economic damage, destroying jobs and businesses, Ā and squeezing family budgets. That is why the Conservatives lost in 1997. It was only when the party apologised for ther ERM mistake that it could move on, and it was only when Labour made a worse mistake with its Big boom and bust that Conservatives had a chance of winning again.

The Conservative poll rating fell dramatically on the collapse of the ERM policy. It did not fall during the long arguments over Maastricht. On the doorsteps in 1997 voters were not angry that some Conservatives opposed the single currency. They were complaining about the economic damage the ERM had done to them and their families.

 

128 Comments

  1. Brian Taylor
    October 24, 2013

    Your comments about the EU the ERM and the cost of living are spot on, I remember having just build a new house took a bridging loan to finish it,moved into it,let the old house which was up for sale it took almost three years to sell the price dropping all the time,and interest rates in the TEENS.
    We were not interested about a few rebel MPs it was when was things going to pick up and when were interest rates coming down!!
    Now as a pensioner on a fixed income I want the government to be realistic.
    The UK still only produce about 2% of the worlds CO2.
    We want the cheapest form of Electricity.
    I want the EU to get out of the way on such things as Fracking for Gas.
    And do everything to stop exporting jobs to India and China who have cheap power.

    1. lifelogic
      October 24, 2013

      Indeed the ERM is why the Conservatives lost in 1997 and have not won since. That and the EU ratting Cameron with his equal TV billing for pro EU, green Clegg.

      1. Hope
        October 24, 2013

        John, an excellent blog. Lord Tebbit perhaps has the answer in his column, this is more about Major firing a shot across Cameron’s bow over Europe and any proposed law to enforce a referendum. Major has forgot the misery he caused to millions of people and business for his fantastical dream to be part of an EUSSR. I will never forget the strain he placed on household pocketsacnd businesses having to find 15 percent interest for mortgage payments and the like.

        He also forgets that he condemns colleagues over Europe but says nothing about his colleagues who behaved far worse towards Thatcher- he was in cabinet what did he say or do about this despicable behaviour from those who owed their career to her? No wonder she had little regard for him come the end when the extent of his true beliefs over Europe became known to her.

        Cameron should have learnt and used better advisers. I can only see his skin being saved by an EU referendum before the election. Next year’s European elections will finish him off.

        1. lifelogic
          October 24, 2013

          Cameron is surely just a John Major at heart, but one who can speak in full sentences and wears his underpants inside his trousers. Not really any better in substance just in superficial veneer and polish – no working compass just the same.

          1. Denis Cooper
            October 25, 2013

            Obviously Cameron is not exactly the same as Major, but it was several years before the general election that I started to get the rather depressing feeling that in many ways he would pick up where Major left off. More accurately, I suppose, it’s as if Major had kicked a long pass forward and Cameron was there to pick up his pass and run with the ball towards the same goal. There’s so much of the same tripe being recycled from the Major era it’s sometimes like reliving it.

    2. MartinW
      October 24, 2013

      The ERM entry was, of course, a disaster. What I now find irksome is that Norman Lamont (very ‘sound’ on the EU and so-called ‘global warming) seemingly got the whole blame for it, and the BBC has ever since ensured that the whole blame stays with him. John Major appears to have got off more or less scot-free.

    3. sjb
      October 25, 2013

      Brian wrote: Your [JR’s] comments about the EU the ERM and the cost of living are spot on, I remember having just build a new house took a bridging loan to finish it,moved into it,let the old house which was up for sale it took almost three years to sell the price dropping all the time,and interest rates in the TEENS.”

      Are you sure about the timeline, Brian? [1]

      Domestic measures had failed to control the cost of living: inflation 10.9%, interest rates 15%. [2] So “the economic case for joining [the ERM] was that it would provide a more successful basis for macroeconomic policy, particularly counter-inflationary policy […]”[3]

      In just under two years of ERM membership, inflation had fallen to 3.6% and interest rates had fallen to 10% (the day before Black Wednesday).[4]

      [1] Oct 1990. UK joins ERM.
      Apr 1992. GE: 14.1m vote Conservative (42.2% share of the vote).
      Sep 1992. UK leaves ERM.
      [2] Budd, A. (2004), Black Wednesday: A Re-examination of Britainā€™s Experience in the Exchange Rate Mechanism
      [3] ibid.
      [4] ibid.

  2. Bazman
    October 24, 2013

    Not profiteering, but need a windfall tax, so its not profiteering, but just shaking the tree?

  3. Mick Anderson
    October 24, 2013

    A windfall tax means that the Government takes away more money that ultimately comes from the consumer. Punishing the energy companies for doing their best for the good of the shareholders is not helpful.

    What the consumer needs is for less money to be taken from them in the first place. However, we know this Socialist Government doesn’t understand this by the swingeing taxes we suffer, especially the nonsense “Green” taxes that specifically contribute to the energy price problem.

    This is a situation that a competent Regulator should never have allowed to happen – they should have been able to cap price rises within reasonable and defined limits. So, why are we bothering to fund them, either?

    1. lifelogic
      October 24, 2013

      Who would want to invest somewhere, where you do not know what random new taxes might come out of the blue from fools like John Major.

      1. oldtimer
        October 24, 2013

        Quite. The UK is not exactly “open for business” if you can have an arbitrary tax slapped on your business any time at the whim of a politician. The UK gets more like a banana republic by the day.

      2. APL
        October 25, 2013

        JR: “where you do not know what random new taxes might come out of the blue from fools like John Major.”

        Exactly. And we have ‘son of major’ ( in the idealogical sense ) as PM now.

    2. uanime5
      October 24, 2013

      It’s wishful thinking to believe that companies will lower their prices simply because they get a tax cut. Osborne reduced corporation tax to 20% but that didn’t result in companies charging less for their goods.

      1. Mick Anderson
        October 24, 2013

        The small reduction to Corporation Tax would not be visible to the consumer. It’s a tax which is only paid on profits, which are a relatively small percentage of the cost of what you pay for. Any reduction in the customers bill would be a small percentage of a small percentage.

        However, as JR details, removing the gratuitous “Green” taxes and abolishing VAT on domestic fuel (which the EU will not permit) would make a big difference to the consumers bills. They are passed directly from Government to the consumer.

        Ofgem should be in a position to ensure that the energy companies pass on any tax reductions, if they have a sudden rush of competence.

        1. uanime5
          October 25, 2013

          Given that Ofgem hasn’t ensured that any saving from falling gas prices are passed onto the consumer I doubt they’ll ensure tax reductions are passed on. After all if companies can already get away with charging these prices them have no incentive to reduce them.

      2. APL
        October 25, 2013

        uanime5: “Osborne reduced corporation tax to 20% but that didnā€™t result in companies charging less for their goods.”

        1. GOVERNMENTS have conditioned people to expect high prices.

        2. Low prices are good, but jobs are better.

        3. if companies have more advantageous tax regieme, more might come and employ people here.

        4. Last night in a local pub, the place was chock a block with Spanish. Talking to a few of them, there are NO jobs in Spain. Their women are cute though.

        1. uanime5
          October 25, 2013

          Despite the cuts in corporation tax and the increase of 1 million private sector jobs unemployment level are still the same as they were in 2010. There’s also little evidence that more companies are coming to the UK because of the lower levels of corporation tax.

          1. APL
            October 26, 2013

            uanime5: “unemployment level are still the same as they were in 2010.”

            With open EU borders it is impossible while the southern Europe is in depression – I don’t know what else you could call 50% youth unemployment or 25% adult unemployment in, for example Spain – to ever bring down unemployment levels in this Country.

            I’m not going to bother to check out the number of countries that are coming to the UK directly as a result of lower corporation tax. But you can bet your last Ā£ that if you assert a thing, the opposite is correct.

          2. APL
            October 26, 2013

            APL: “countries”

            *companies*

  4. Andyvan
    October 24, 2013

    What we can see from the litany of economic mistakes by both Labour and Conservative administrations is that most of our economic woes are caused by stupid policies that only exist because politicians are there interfering and making things worse. We would all be better off if free market mechanisms were left to themselves to regulate the economy. What so few people realise is that no central planner, whatever philosophy he follows, can control an economy as efficiently as free markets can. If you don’t believe it just look at what happened to the Soviet countries, inefficiency, poverty and stagnation. Nowadays we have a much more socialist society than those former communist nightmares and look where it has got us- ruinous debts, no sovereignty, massive and intrusive government with waste and poor service throughout. Less is more but none is best when it comes to government.

    1. uanime5
      October 24, 2013

      Care to explain why the free market has resulted in energy, water, and rail prices rapidly rising. It seems all the free market does is make more money for the owners of companies, not provide a better service for the consumer.

      Also the UK is nowhere near as communist as the USSR.

      1. oldtimer
        October 24, 2013

        These are not free, competitive markets. They are regulated. These are examples of cosy corporatism – especially evident in the UK energy market with its subsidies and guaranteed returns. JR has also written extensively on Network Rail and its subsidies, inefficiencies and its lack of accountability.

      2. Mick Anderson
        October 24, 2013

        All of the items you list are from regulated industries, which by definition do not operate in a free market.

        1. uanime5
          October 25, 2013

          Given that when markets weren’t regulated the result was monopolies and cartels I doubt that removing these regulations will make the market act more responsibly.

      3. APL
        October 25, 2013

        uanime5: “Care to explain why the free market . ”

        The UK isn’t a free market economy. It is over regulated, corporate – government incestuous arrangements abound. The whole thing is corrupt.

        Presided over by the hydra that pretends to be at times the Tory party at other times the Labour party.

    2. Bazman
      October 24, 2013

      Free market companies owned by communist China and socialist France. Why can’t a capitalist government own one too?

      1. Edward2
        October 25, 2013

        So State owned Chinese and French companies are in a free market are they Baz?
        You will be saying the UK is a capitalist free market economy next…Oh sorry you actually did say that.

        1. Bazman
          October 25, 2013

          Can Companies privately owned by communist and socialist countries never mind capitalist ones? Murky stuff in France and especially China as business is propped up by the state. Hmm Here too! Not a free market at all. The next thing you will be telling us is that The French car industry is not subsidised as this would be illegal.

          1. Edward2
            October 26, 2013

            The French car industry is subsidised by the state.

  5. Peter van Leeuwen
    October 24, 2013

    I suspect that John Major, just like David Cameron, represents a large chunk of the Conservative Party which are essentially pro-EU. You don’t become prime-minister without support. That said, if people in other EU countries and their governments agree with the analysis in this blog (green levies article and this one), this would become a rather easy EU reform to go for. Unlike immigration, I don’t this issue raised in other countries. Maybe I have overlooked it being raised elsewhere?

    Reply The Copnservative party is Eurosceptic, voting against Nice Amsterdam abnd Lisbon and now wanting a new relationship

    1. Brian Tomkinson
      October 24, 2013

      Reply to reply,
      On this occasion I find that Mr van Leeuwen’s views about the Conservative party being essentially pro-EU more convincing. Just saying repeatedly that you are a member of a Eurosceptic party doesn’t make it any more believable. John Major said this week that “The threat of a federal Europe is as dead as Jacob Marleyā€ – are you telling us that he is Eurosceptic too?

      Reply No, I am ot saying that. Sir John is no longer in Parliament.

      1. Denis Cooper
        October 24, 2013

        Did Major really say that?

        I suppose it’s “game, set and match to Britain”, then.

        What a liar he is now, just as before.

        1. lifelogic
          October 24, 2013

          Indeed

          1. lifelogic
            October 24, 2013

            Typical he should chose Dickens.

      2. Brian Tomkinson
        October 24, 2013

        Reply to reply,
        He may not be in Parliament but like Heseltine and Clarke isn’t afraid of speaking out for the EUas a Conservative. I wonder, if you had been successful and replaced him as leader, would the UK now still be in the EU?

        Reply Certainly not in this EU as I have been against all the main transfers of power to the EU. Who knows what they would have offered the Uk to allow them to go ahead with their Union if we had told them we do not want to be governed from Brussels.

        1. lifelogic
          October 24, 2013

          Why on earth the the Tory party member vote follow Major over the inevitable cliff after he resigned, were they all mad are they still?

    2. stred
      October 24, 2013

      Western Europeans not bothered about immigration? Is this a Dutch attempt at irony?

      1. Peter van Leeuwen
        October 25, 2013

        @stred: misunderstanding?
        ” Unlike immigration, I donā€™t this issue raised in other countries”. What I mean is that I don’t see the issue of green levies on energy being raised in other countries in this way, unlike immigration, which IS an issue in many European countries.

        1. Edward2
          October 25, 2013

          You are not looking very far or hard then Peter, because I read recently of several big German companies complaining that if energy prices and energy taxes hitting on them don’t reduce, they will relocate out of Germany.
          Eg BASF talking about moving plants to USA to remain competitive.

  6. Denis Cooper
    October 24, 2013

    If the government wanted the EU to move on this then it would need a big stick to carry while still talking softly.

    If we had a patriotic government and Parliament then one obvious move would be for the government to draft a Bill to gain parliamentary authorisation for ministers to disapply obstructive EU laws, “notwithstanding the European Communities Act 1972”.

    But we don’t have a patriotic government and Parliament; we have a government formed by a coalition between two parties, one of which is fanatically pro-EU while the other is at least consistently and staunchly pro-EU, and we have an elected House of Commons with an overwhelming majority of members who are pro-EU and a substantial number who are outright eurofederalists, whatever the views of the people they are supposed to represent, and with only a small minority who have any strong commitment to the sovereignty of our national Parliament or real belief in our national democracy, and an unelected House of Lords packed with EU supporters and pensioners and fellow travellers.

    I suppose the Tory party could do what it has done on at least two previous occasions, which is to draft and publish its own Bill for this purpose, while knowing that coalition policy would not allow it to become an official government Bill during this Parliament, and if it was introduced as a Private Members’ Bill then there would be very little or no chance that it would become law.

    Doing that would at least set out a clear position for the Tory party, and visibly separate it from its eurofanatic partners in the coalition government.

    1. Peter van Leeuwen
      October 24, 2013

      @Denis Cooper: Here is an interesting quote, for you to ponder on.
      ā€œSovereignty is in reality the power to have true influence over oneā€™s own destiny, and membership of the European Union enhances that sovereignty rather than diminishes it.ā€
      (source: “The UK & Europe: Costs, Benefits, Options. The Regentā€™s Report 2013”)
      I can happily agree with that quote, so no doubt you will find it difficult. So why not read the whole report and you might understand.

      1. Denis Cooper
        October 25, 2013

        I don’t have to ponder on that, Peter, I pondered on that type of argument years ago and saw through it; and, believe me, I do understand.

      2. Edward2
        October 25, 2013

        A quote straight out of George Orwell’s book of doublespeak.

  7. alan jutson
    October 24, 2013

    Strange how the vast majority of the population have not, and still do not, seem to understand how the EU interferes with almost every aspect of government and their lives.

    Perhaps the simple explanation is that the media do not explain it clearly enough, or indeed at all.

    Many of the population have only really become aware since we have had mass immigration over very many years.
    Perhaps because it is visual, and they see it every day with their own eyes, or because in almost every service industry they use, they communicate to someone who does not have English as their first language, so they hear it with their own ears.

    Yes the media and their reporters have a lot to be blamed for.

    But it is our own MP’s who really hold the blame, as it is they who could really do something about it.

    Keep plugging away John.

    1. Mike Stallard
      October 24, 2013

      Alan – you, too, are spot on!

    2. uanime5
      October 24, 2013

      I seem to recall it wasn’t the EU that trebled tuition fees, set up free schools, introduced the bedroom tax, or tried to privatise all our industries. It seems that the EU isn’t he cause of all our problems.

      How exactly is it the fault of the EU that UK companies prefer to hire foreign workers because they’ll work for less money and don’t understand their legal rights?

      1. alan jutson
        October 24, 2013

        uni5

        You are correct the Eu is not responsible for all of our problems.

        Just the major ones.

        We cannot do what we want with tax
        We cannot do what we want with Immigration
        We cannot do what we want with some regulations
        We cannot do what we want with some legislation
        We cannot do what we want with Benefits
        We cannot do what we want with Prisoners.
        Etc

        Bedroom tax what is that ?
        I have not had a tax increase, and I have more bedrooms than I use on a daily basis.
        Or do you mean rent fully paid by the taxpayer is now limited to only the size of property some people need.

        Tuition fees I agree a mistake, but then students only pay it back if they earn more than Ā£21,000.
        The biggest mistake is to give the same loans to foreign students, as we do to UK residents, absolutely stupid, stupid, stupid.

        1. peter davies
          October 25, 2013

          spot on

        2. uanime5
          October 25, 2013

          The UK has almost full control over tax law, non-EU immigration, most UK legislation, benefits to non-EU citizens, and prisoners (the ECtHR is not the EU).

          The bedroom tax is a tax on people who are on housing benefit, yet have more bedrooms than the government approved of. Even when they can’t move to a smaller property because none are available.

          The problem with increasing tuition fees is that the taxpayer has to pay them if the student cannot. Given the levels of youth unemployment and the number of people working in low paid jobs this may result in a large amount of debt having to be written off in 30 years time (these debts cannot be collected after 30 years). So the Government may have created a long term problem in an attempt to save money in the short term.

          1. alan jutson
            October 26, 2013

            Uni5

            So you agree we do not have total control over our own affairs (your para 1)

            You agree it is not a tax but a limit on benefits (para 2)

            I agree with you about tuition fees.

          2. Edward2
            October 26, 2013

            Uni For once I agree with you on your point on tuition fees.
            The idea is that all students will run up a debt which they will pay back.
            But I fear the number that will actually pay their debts back will be small for the reasons you have said and because of the large numbers of foreign students who may be very difficult to get the money out of after they have qualified and left this country.
            I wonder if anyone has thought about the huge potential bad debt that is being created?

      2. Edward2
        October 24, 2013

        Uni,
        “UK companies prefer to hire foreign workers because theyā€™ll work for less money and donā€™t understand their legal rights”

        Provide evidence of your claim or admit you just made it up

        1. Denis Cooper
          October 25, 2013

          “Provide evidence of your claim or admit you just made it up”

          Ah, a taste of his own medicine, let’s hope he relishes it.

        2. uanime5
          October 25, 2013

          Well there was this article in the Express about companies preferring cheaper Hungarian workers:

          http://www.express.co.uk/news/uk/424333/Scandal-of-cheaper-foreign-workers-who-snatch-British-jobs

          Also as employer is legally able to pay foreign workers below minimum wage if they provide them with food and accommodation.

          1. Edward2
            October 26, 2013

            Providing accommodation and food would be far more costly than simply paying min wages.

            And gosh even I find the Express a dubious reporter of news so Im surprised you have used them as a source Uni.

    3. behindthefrogs
      October 24, 2013

      A lot of people understand that the EU is the top level of our elected government. What is unfortunate is that people are being misled by the members of our lower level parliament into believing that we should be fighting the laws that they pass. We need a smaller and thus cheaper parliament that concentrates on those areas where the EU is not involved.

      1. Denis Cooper
        October 24, 2013

        That’ll be the “lower level parliament” which is actually still the national Parliament of a sovereign state, the United Kingdom, and which is therefore itself sovereign; while what you misleadingly call “the top level” in fact has no powers other than those delegated by the sovereign member states who have established the European Union through their treaties; in other words that “top level” has no legal power whatsoever in the United Kingdom other than the power granted to it by the sovereign Parliament of the United Kingdom; which grant of power can be withdrawn at any time that Parliament chooses, and as far as I’m concerned the sooner the better.

  8. Richard1
    October 24, 2013

    Green policy will be a reason to vote to leave the EU if we have not managed to get out of these EU-inspired policies by then. Of course its not just the EU. The UK will also have to repeal Labour’s Climate Change Act.

    A small detail – wasn’t it Margaret Thatcher, not John Major, who took us into the ERM?

    Reply It was John Major who proposed and helped push it through against MT’s wishes

    1. Richard1
      October 24, 2013

      I was then and am now a great admirer of MT, but I don’t find that convincing. She was Prime Minister. If she thought ERM was the disaster it turned out to be she should either have stopped it or resigned. Her admirers must recognize this episode as a negative balanced against a huge net positive contribution made by MT to the country & the world.

    2. Denis Cooper
      October 24, 2013

      But MT put her name to the 1983 Stuttgart Declaration on European Union:

      http://www.eurotreaties.com/stuttgart.pdf

      Which inter alia said:

      “3.1.3 Strengthening of the European Monetary System, which is helping to consolidate an area of monetary stability in Europe and to create a more stable international economic environment, as a key element in progress towards Economic and Monetary Union and the creation of a European Monetary Fund.”

      If she didn’t want Economic and Monetary Union, why did she agree to support steps towards Economic and Monetary Union?

      It’s worth reading that Declaration she signed to see the depth of her commitment to the EU project at that time; and even if she later changed her mind that did not undo the damage she had previously done.

      1. Peter van Leeuwen
        October 24, 2013

        @Denis Cooper: in fairness to MT, I remember reading that she regarded her signing up to the Single European Act in 1986 (a huge treaty which made the Maastricht Treaty inevitable) as her greatest political mistake. After that, John Major, like Margaret Thatcher only human, could have done little else than sign up to the Maastricht Treaty.

        1. peter davies
          October 25, 2013

          thats right – she had pro EU ministers around her giving her advice. JR probably knows what went on here – she admitted herself the SEA was her biggest mistake – we all make them

          Reply I advised against signing the SEA but the FCO won.

      2. Lindsay McDougall
        October 24, 2013

        From being pro European in 1973, Margaret Thatcher slowly became more Eurosceptic as she experienced the EU in practice and realised the direction in which it was heading, resulting in her Bruges speech. Rumour has it that MT was eventually heard to utter the magic words “Enoch was right” on three issues – immigration, Europe and Northern Ireland.

    3. Kenneth R Moore
      October 26, 2013

      What is it about politics that makes a former bank clerk / circus performer believe that he is qualified to make such an important financial decision as joining the ERM ?. Why did the Conservative party, in it’s wisdom, elect such an unsafe pair of hands. Has Major ever personally apologised for the misery caused by his 15% interest rates ?

  9. lifelogic
    October 24, 2013

    The green religion is already a huge & absurd tax on the energy sector and pushes energy costs up hugely. Yet another windfall tax would just push prices up further and deter future investment in the sector. Major is a proven fool, as we already knew and an unapologetic one too. Cheaper energy comes from more competition with perhaps a far clearer (no confusion marketing) far comparison basis, fewer regulations/restrictions, no green religion lunacy with no absurd subsidies distorting the playing field.

    But we still have Ed Davey and Clegg both high priests of this palpable nonsense in place and talking the same old rubbish.

    Much we made of Major having won an election. To my mind it was really a fourth victory for Thatcher’s policies and he was seen as her choice. Once in office it became clear he was a socialist, pro EU fool. He could not even bring himself to apologise for his absurd ERM that caused so many peoples’ businesses, jobs, lives and houses to be lost. His approach destroyed the Tories reputation for economic competence and they have lost 3 and 1/2 elections since – as a direction result. Cameron is clearly trying to emulate Major but without the excuse of total vacuity.

    I see Newsnight last night had loads time for Russel Brand’s (words left out) half baked views (in as far as you could see what these views actually were). Yet sensible scientists, who are climate realists, seem to be almost banned by the BBC still. A huge fuss over the sensible geologist Prof Ian Plimmer the other day on World at One.

    What on earth is the BBC for is is just, pro EU propaganda, an endless demand for more taxes, more green renewable drivel, more regulation, more enforced “equality” and more immigration?

    1. uanime5
      October 24, 2013

      Regarding cheaper energy you forgot separating the big 6 into companies that generate energy and companies that sell energy. That way they can’t sell energy to themselves at inflated prices, then claim that they’re only making small profits from selling it to the general public.

      1. lifelogic
        October 24, 2013

        I agree there is little real competition in the market and that needs resolution but not by idiotic John Major Taxes.

      2. Edward2
        October 24, 2013

        You have proof of this I presume, as if were true the one type of energy company would be declaring huge profits.
        Either give evidence or admit you made it up.

        1. uanime5
          October 25, 2013

          The beauty of the energy company’s scheme is that they don’t declare huge profits because of the way profits are declared.

          Let’s say energy company A can generate energy at Ā£1 per kW/h, they then sell it to themselves for Ā£10 per kW/h. So one part of the company has made a loss of Ā£10 per kW/h and another part has made a gain of Ā£9 per kW/h (money from sale minus generating costs). The company then sells this energy for Ā£10.50 per kW/h and claims that it only makes a 5% profit from the sale of this energy, even though they make much more when you factor in how much it cost to generate this energy.

          The money made from the company selling the energy to itself can be hidden by not declaring this money as profit (so the company keeps it as a cash reserve), or using this money to pay their directors multi-million pound salaries and bonuses (thus reducing the amount of money they need to declare as profits).

          Finally if all energy companies use the same system then there won’t be one energy company declaring huge profits, they’ll all be declaring similar sized profits.

          1. Edward2
            October 26, 2013

            This totally fails to explain how the profits are hidden from HRMC
            Do you know?
            Is it magic or a fantasy of yours?

  10. peter davies
    October 24, 2013

    So many problems time and time again seem to lead back to the EU – their tentacles reach so wide that its hard to distinguish what is UK policy and what has been imposed by the back door.

    Its all so sad when it appears that our EEA status would give us the same access to the EU So called single market though we would still be affected by many of their rules.

    The political class need to accept (not just Tories and UKIP) that the EU game is up – and the likes of John Major would be well to stay silent on this issue after the role he played in damaging the UK economy via the ERM and signing the Maastricht Treaty.

    One blessing though – imagine had we not crashed out of the ERM – you could almost guarantee that the dimwits in the Labour party would have taken us into the Euro and we’d be in a much worse state now.

  11. Elrond Cupboard
    October 24, 2013

    And who, ultimately, does Major think would end up paying this “windfall tax”? The consumer, that’s who. Thanks JM.

    1. lifelogic
      October 24, 2013

      Indeed once to the supply companies and then again due to the lack of future investment in the UK that results. It is just stupidity in the extreme.

  12. Nick
    October 24, 2013

    More tax. Solves every economic ill from general malaise, to syphilis. Get your bottles here. …

    It’s snake oil.

    Politicians imposed the tax. It’s MPs like yourself who voted for the finance bills that imposed the tax that are responsible. Not the EU.

    You voted for it. You carry the can.

  13. Roger Farmer
    October 24, 2013

    “We need the EU to suspend or repeal its renewables requirement.” Yes we do, but I would submit, FAT CHANCE! Even if there was a will on the EU’s part to commit such an heretical act, it would not happen within the time scale required. This is a problem that the UK has to deal with now not some woolly time in the future.
    It is down to Cameron to sort it by removing the legislation from the UK statute book. The opposition, in this case both Lib/Dems and Labour who agreed it, along with recent additions agreed by the Conservatives, are in a difficult position. Do they have an appetite for continuing these costs and be seen to be against their removal when approaching a General Election. What excellent ammunition for Conservative guns.
    If what has happened in the USA to fuel costs, following the introduction of fracking, is indicative, then we must go flat out to acquire this source of gas. There should be no tolerance for the Luddite few who would have us living in yurts. I see this energy source as an essential component in the future UK economy. Learn something from the Norwegians and put away a substantial percentage of the government tax so that the investment income derived therefrom can bolster our future social needs.

    1. uanime5
      October 24, 2013

      Firstly if Cameron starts trying to ignore EU law the UK will be prosecuted for non-compliance, something that is unlikely to benefit the economy.

      Secondly shale gas reduced the prices in the US because their shale gas is easy to extract but difficult to export, so the gas companies have to sell it at a low price if they want to sell all of it. By contrast in the UK shale gas is more difficult to extract but much easier to sell abroad, so it’s unlikely to have any effect on gas prices.

      Thirdly Poland was unable to extract large amounts of shale gas, which is why most of the fracking companies left. So there’s no reason to believe that shale gas will be profitable.

      1. Denis Cooper
        October 25, 2013

        I’m sure there’s a word for somebody who sides with the enemy against his own country, but that word escapes me for the moment.

        1. uanime5
          October 25, 2013

          They’re called a realist.

          1. Denis Cooper
            October 26, 2013

            No, that’s not the word I’m searching for …

  14. stred
    October 24, 2013

    The figure of Ā£47 for the Green Deal seems high, especially as it is expensive for the householder and the restrictions make insulation measures more expensive than they need to be. I have insulated 3 houses for hundreds of Ā£, not thousands and cut bills by 50%. The returns on Green Deal investment are negative and perhaps this is why the uptake is miniscule.

    The additional UK carbon tax on generation should be cut forthwith and wind and PV subsidies slashed in order to stop any more of this folly.

  15. formula57
    October 24, 2013

    Exactly so! Well said.

    As you have noted previously, with cheap energy the USA has enjoyed recovery. Recovery should be the priority and only thereafter should whatever “green energy” levies, restrictions, imposts, and all other forms that push up prices be considered.

  16. Bob
    October 24, 2013

    The Conservative poll rating fell dramatically on the collapse of the ERM policy. It did not fall during the long arguments over Maastricht.

    Sadly, most of this stuff is so impenetrable and excruciatingly boring that the average voter cannot be bothered to even attempt to understand the consequences, just like the Treaty of Rome itself. That’s why we have the BBC, to educate and inform us.

    Sadly, the only educating and informing they do is when it suits their agenda, like the ERM fiasco, because it was a massive (the word has since been redefined under the Gordon Brown premiership) failure of the Tory Party, which lead on to the corridors of Broadcasting House being strewn with empty champagne bottles in 1997.

    I stopped paying for a TV Licence.
    Ā£148.50 per year saved. That will pay for some nice warm clothes.

  17. Roy Grainger
    October 24, 2013

    The windfall tax idea is bizarre. If we tax these power companies they will be even more reluctant to invest in new generation capacity in UK and may quit entirely, the likes of EdF can make their profits elsewhere in the world.

    I notice complaints from the left about the Grangemouth petrochemicals plant closing, but it is the entire goal of “green” policy to price such plants out of business in the UK and it is succeeding in doing that. Pricing the power generators out of the UK too would seem suicidal.

    1. uanime5
      October 24, 2013

      Given that most energy companies aren’t investing in the UK, which is why the Government had to pay China to build a new power plant and EDF to run it, their loss will have little effect.

      1. Edward2
        October 24, 2013

        Our nuclear capability was sold off by your beloved Labour party Uni, that’s why we now have to get nations like France and China to help us.

        1. uanime5
          October 25, 2013

          So because we sold our nuclear power plants to the private sector we need the help of France and China because the private companies aren’t going to replace these power plants. It seems the private sector isn’t that useful after all.

          1. Edward2
            October 26, 2013

            Read it again.
            It was our technical capabilities that were sold off and by politicians not by the private sector.
            So its the State that caused this.

  18. Cheshire Girl
    October 24, 2013

    If the Government wants to reduce people’s energy bill, why don’t they stop charging VAT on it? I , and I suspect many others, remember the time when there was no VAT on gas and electricity bills. Frankly I was appalled when it was introduced. After all, being able to keep warm and have some hot water is hardly the epitome of luxury, and in many cases it is an absolute necessity !

    1. Denis Cooper
      October 24, 2013

      Because once VAT has been applied to something it can never be removed, and the minimum permissible rate is the present 5%.

      As explained in the House of Commons Library Briefing Paper here:

      http://www.ukbriefingpapers.co.uk/briefingpaper/RP97-87

    2. backofanenvelope
      October 24, 2013

      They can not remove VAT from domestic fuel bills. When Gordon Brown became Chancellor he was going to reduce VAT from 8% to zero, but under EU rules if something is subject to VAT it cannot be reduced below 5%.

    3. Antisthenes
      October 24, 2013

      Sadly I believe being locked into the EU precludes much tinkering by the UK with VAT once in it is next to impossible to remove. So overriding has EU law, rules and regulations become that room for maneuver by the UK government and parliament is seriously curtailed. Parliament and government being largely populated by europhilies and those ignorant of how the EU actually works this knowledge is kept very much under wraps. The media is also hampered by ignorance and bias (BBC ) although that is not just a preserve of the EU, energy is another area (dominated by the Greens agenda). So they do not inform and when they do it is generally factually incorrect. When the matter of the EU stopping the UK from doing things to improving the lot of it’s citizens it is put forward as the reason for no doing it. So everyone shrugs their shoulders and says “that’s that then”. Instead they should be shaking with rage and demanding that we leave the EU and negotiate a much different relationship that centers around trade that contrary to popular belief the EU in the end would want as much as the UK. Clegg spouting falsehoods about losing three million jobs is just that.

  19. Brian Tomkinson
    October 24, 2013

    Many of us have warned about the likely dangers of this obsession by politicians with “green” policies and taxes. I think that many of them thought they had found the holy grail – a popular tax – when they jumped on the global warming bandwagon. As predicted we are being priced off the roads, out of the skies and struggling to heat our homes directly as a consequence of this madness.

  20. Bert Young
    October 24, 2013

    Removal of the EU imposed “green” tax would be a boost to every household in the country ; if Sir John Major had thought his social conscience through , he should have put this item at the top of his list rather than a one-off windfall tax . He was a most unsuccessful PM probably because he got his priorities wrong most of the time ; his intervention at the moment is a severe embarrassment to the Tories , he , and the Clarkes of this world need to accept they have been put out to grass .

    1. Bob
      October 24, 2013

      @Bert Young

      ” he , and the Clarkes of this world need to accept they have been put out to grass .”

      Do you know what Ken Clarke, Ted Heath and Leon Brittan had in common?

      1. stred
        October 24, 2013

        EU supporters. Any prize?

      2. APL
        October 26, 2013

        Bob: ” Ken Clarke, Ted Heath and Leon Brittan had in common?”

        a) Members of common purpose.

        etc ed

    2. uanime5
      October 24, 2013

      Since when have tax cuts been passed on to the consumer. The cuts in corporation tax didn’t result in shops selling their products any cheaper.

      Even the fall in the price of gas wasn’t passed onto consumers.

      1. Edward2
        October 24, 2013

        Uni
        “The cuts in corporation tax didnā€™t result in shops selling their products any cheaper”
        Please provide evidence that this assertion is correct or admit you just made this up.

        1. uanime5
          October 25, 2013

          The retail price index didn’t decrease between 2010 an 2013, therefore the price of goods in shops didn’t fall.

          1. Edward2
            October 26, 2013

            That doesn’t prove correlation
            What raw material price rises or overheads cost rises happened in that period for example?

    3. Denis Cooper
      October 24, 2013

      It was the Major government that imposed VAT on domestic fuel and power, and one reason for that was to cut emissions of carbon dioxide.

      If you skim through the 1997 briefing here:

      http://www.ukbriefingpapers.co.uk/briefingpaper/RP97-87

      you’ll see repeated references to this, eg on page 13:

      “One of the Conservative Government’s reasons for abolishing the zero rate on domestic fuel & power was that it would help the UK meet its commitment under the United Nations Framework Convention on Climate Change (FCCC) signed at the Rio summit in 1992. The Convention committed the participant developed countries, including the UK, to produce plans with the aim of returning their emissions of greenhouse gases to 1990 levels by the year 2000 and to report
      progress regularly to the UN.

      Carbon dioxide (CO2) is the most important greenhouse gas. In 1990 it accounted for 81% of the direct global warming potential from national greenhouse gas emissions in the UK. CO2 emissions in that year were an estimated 611 million tonnes, containing 167 million tonnes of carbon (MtC). In December 1992 the Government published its forecast that, on unchanged policies, emissions would rise by 10MtC over the decade to 170MtC by the year 2000. Clearly, to meet its Rio commitment the UK was required to introduce measures to bring about a fall in
      emissions of at least 10MtC. The burning of fossil fuels – coal, oil, gas – causes nearly all CO2 emissions. If one divides emissions by end user, the residential sector and transport each account for roughly one quarter of all emissions, while industry and the commercial/ institutional sectors account for 30% and 14% respectively. Imposing VAT at the standard rate on domestic energy, and so increasing the price of fuels to households, is one method of tackling emissions.

      Indeed it has been argued that VAT should be imposed at a higher rate on energy than anything else, given the consumption of energy by households may have greater environmental costs than the consumption of other goods and services, and that those costs are unlikely to be fully reflected in the price of energy.”

  21. Neil craig
    October 24, 2013

    It is conceivable there may be some of the most stupid backbench Labour MPs who really do not know that the energy companies are not making excess profits compared to turnover.

    John Major is not such an ignorant fool. He knows perfectly well that the fault for high electricity prices lies 100% with our political class and that the entire campaign against the producers is a corrupt diversion etc

    He knows that 90% of electricity prices are political parasitism and that we could be out of recession in weeks, possibly days, if the ruling parasites would allow it.

    1. uanime5
      October 24, 2013

      Yet again you’ve failed to provide any evidence that “90% of electricity prices are political parasitism”. I suspect you’ve haven’t included these figures because you’ve just made them up.

  22. Mike Stallard
    October 24, 2013

    I am just the kind of shivering OAP who politicians love to patronise.
    Do you know what? I could not give a damn about the winter fuel allowance which really does not address the problem. I can manage, thank you very much, without your borrowed money.

    I care a lot about the EU Directives which have – and are – closing down and wrecking our power stations and the ridiculous wind farms which are planned (read Christopher Booker). Do politicians in the EU believe that there are huge magic batteries somewhere in the sky which will store the electricity until it is needed? Don’t they realise that solar and wind do not work at night or on still days? God knows, even people in the eighteenth cantury – no the middle ages – knew that and they went for the local stream.

    I care about the Green Delusion turning out the lights. It will not only mean we are crouched over candles without the Tele or our computers, it will have a dire effect on law and order, the hospital system, schools (I bet they are the first to close) and even a few little shops too.

    The politicians who did this won’t look quite so smug then,will they.

    1. uanime5
      October 24, 2013

      The EU gave UK politicians a choice, either upgrade your power plants or close them down by 2015. These politicians assumed that the free market would simply built new power plants for them and opted to close down most of the UK’s power plants.

      It seems the free market isn’t so interested in replacing capacity after all.

      1. Edward2
        October 24, 2013

        Uni “It seems the free market isnā€™t so interested in replacing capacity after all”.

        No because there isn’t any profit to be made on the investment.

    2. APL
      October 24, 2013

      Mike Stallard: “I care a lot about the EU Directives which have ā€“ and are ā€“ closing down and wrecking our power stations and the ridiculous wind farms which are planned ”

      Don’t forget the steel works that was mothballed and decommissioned because it made more money idle by milking the EU Carbon Credits scam than it took to make steel.

      This is the pass to which the political class has brought us,

  23. JoeSoap
    October 24, 2013

    It is clear that the cost of energy needs to be addressed, as well as elements of its pricing.

    As a first step the government should remove VAT from the first x units of its use per capita. This would discourage over-use whilst keeping poor folk warmer.

    Next tackle the costs as you say.

    To start a market-distorting exercise by punishing power companies is about as sensible as entering the Euro at Euros 1.50 to the Pound. Oh……

  24. Lindsay McDougall
    October 24, 2013

    John Major says that many people will have to choose between heating and eating this Winter. The return on capital accrued by the big six energy companies is less than that of Tesco and similar to that of the other large food retailers.

    So why hasn’t John Major also called for a windfall tax on the profits of the big six food retailers? Surely shome mishtake.

    1. uanime5
      October 25, 2013

      Well the big 6 retailers didn’t increase all their prices by 10% recently.

  25. uanime5
    October 24, 2013

    The underlying problem, dear energy, has to be addressed.

    Energy is expensive because John Major allowed companies that generate energy to merge with companies that sell energy. As a result these companies no longer have an incentive to generate energy as cheaply as possible. They can also sell energy to themselves at inflated prices, then cry crocodile tears and claim that they’re barely making any profit from selling the energy; even though they’re making massive profits from producing it.

    In this case of energy we need the EU to suspend or repeal its renwables requirement.

    Again you claim that this problem is due to the EU and again you haven’t explained why no other EU country is having this problem.

    Given that the UK has harsher laws on CO2 emissions than required by the EU it’s clear that the problem is UK law, not EU law.

    Demanding that we generate a rising proportion of our electricity from renewables is forcing the cost of energy up./cite>

    Germany generates 25% of its energy from renewable sources. How much has this forced up the cost of German energy?

    The EU needs to suspend or amend its Large Plants Directive. Then we could run our older power stations for longer, saving us a lot of cost, keeping energy prices lower, and delaying the need to spend large sums on replacing them with something dearer.

    Under EU law all the power plants closed because they don’t meet the requirements of the Large Combustion Plants Directive can be reopened provided that they’re upgraded to comply with this directive (Article 4(2)). So the UK has no prospect of getting an amendment simply because we don’t want to pay to upgrade these power plants.

    https://www.gov.uk/government/publications/environmental-permitting-guidance-the-large-combustion-plants-directive

    1. yulwaymartyn
      October 24, 2013

      uanime5: your last line. Absolutely right. Why don’t people understand this? All they have to do is read the Directive. Upgrade the plants, spend the money and job done.

      1. APL
        October 27, 2013

        yulwaymartyn: “All they have to do is read the Directive. Upgrade the plants, spend the money and job done.”

        In theory it is simple. But if you are using a ten or twenty year old plant – it’s not so simple, doable yes. But economic? That’s another matter.

        And then there is the question, should we be spending all that money on a project that won’t even change the variability of the climate, because;

        1. The combined output of the UK economy is > 2% of world total CO2 output.

        2. CO2 is not the primary driver of atmospheric conditions.

        yulwaymartyn: “Why donā€™t people understand this?”

        Why don’t you understand this?

    2. Edward2
      October 24, 2013

      Uni
      “…..theyā€™re making massive profits from producing it”.
      Presumably you have evidence of these huge profits or are you just making this up?

      “no other EU country is having this problem”
      Nonsense energy prices are high in the EU and are making the EU uncompetitive versus low energy countries and adding to the already high levels of EU unemployment, like BASF in Germany saying they are seriously considering relocating to USA

  26. behindthefrogs
    October 24, 2013

    If the UK government believes for instance that the carbon tax imposed by the EU is wrong, why does it impose extra carbon tax of its own? Lets get our own house in order before challenging EU green taxes.

  27. Antisthenes
    October 24, 2013

    Even Sir John should know better all taxes on businesses ultimately end up being paid for by the customer and or the employees. A true measure of profiteering or not is measured by return on capital and as far as I can see energy companies do not come near making excessive returns on their capital. I do wish we could get out of dealing with emotions and deal more with facts and evidence. When everything comes down to spin and the gullible buy into it, which appears to be the majority of us, then reason and common sense is lost and so in the end will be our society.

  28. Atlas
    October 24, 2013

    Perhaps Cameron has finally twigged that being ‘Green’ is no longer a vote winner when the bills for it come home?

  29. David Hope
    October 24, 2013

    I think people are giving Mr Major rather too much respect. Not all of his government was flawed but he was badly wrong on the EU. Also, people keep saying “as the last Tory leader to win a majority..” but let us not forget he was hardly in power long before the election and it was as much a case of giving him the benefit of the doubt than a vote of confidence.

  30. MartinW
    October 24, 2013

    There is no need to wait for anything from the EU, neither a change in their emissions requirements nor anything else. All we need is the will to tell them that we, in the UK, will conduct our energy policy in any way we see fit. After all, Germany is rapidly building coal-fired power stations (and indeed burning lignite!) and apparently without a murmur from the EU. Mind you, having Schultz as a chief dictator of that undemocratic organisation may help, of course.

  31. Normandee
    October 24, 2013

    2.7 billion increase in EU contributions and the Tories abstained, including your friend Hannan, what utter hypocrisy, wasn’t this the contribution that Cameron so famously and loudly vetoed.
    Exactly the same as you he knows that anything he does will get overruled so it’s ok to make a useless gesture, as I am coming to believe is your tactic, if you had any serious belief in what you say you want you would do more. Get rid of Cameron, start the move away from him by resigning the whip, do something positive instead of whaffling.

  32. Iain Gill
    October 24, 2013

    Well I passed a big chemical plant today, and they are still in this day and age burning their excess gas into the atmosphere in many places around their site. A little bit of common sense and using that gas for something constructive would make sense.

    As for windfall taxes I would start with the big multi nationals making big profits here but organised in such a way that their taxes are due in tax havens etc ed

    1. Mark
      October 25, 2013

      A little knowledge about the safety aspects of industrial processes and you would know that flares are essential safety devices.

  33. con
    October 24, 2013

    John – I ask again, who is advising Cameron on how to respond to Miliband wind ups?
    Surely the correct response to Miliband’s call for a price freeze was simply to say it is an idea. It doesn’t solve anything but we’ll look at it.
    All the talk of Marxism was walking in to the trap – looking like being on the side of the energy companies.
    Cameron could have asked why labour allowed energy bills to rise by 122% between 2004 and 2009 without taking similar action if it was so easy. And why Miliband said higher energy bills ‘were a price worth paying (to counter climate change)’ in 2009.
    I can remember Lamont’s career practically ending in 1992/3 for saying a similarly inept comment about unemployment being a price worth paying.
    So why aren’t we seeing re-runs of Miliband interviews?
    And while energy was doubling under labour so was council tax.
    Will Miliband also freeze council tax? No, because that affects his pals in the public sector. If labour gets in again, council tax bills will almost certainly rocket.
    Where is the spark, the fight, the imagination in the Tory party. They always look on the defensive to half baked comments and ideas from Miliband.

  34. lojolondon
    October 24, 2013

    John, I hate it when totally illogical ideas are suggested, and then the Mainstream Medai (particularly BBC / Guardian) usually go all out to support these ridiculous ideas.
    A ‘windfall’ tax sounds like a good idea, taxing someone who just hit the lottery, for example – it wasn’t his money to start off with, he got really lucky, so why not share his luck with those less fortunate?
    BUT they always hurt the poorest most. So when Gordon Brown took Ā£21 Billion out of our mobile telephone companies, did he help anybody? I can tell you that the directors of those companies took exactly the same salaries and bonuses as they would have. But the whole market needed to pay that Ā£21 Billion back, so they all put up their prices, and the people of this country would have paid the Ā£21 Billion back over the years plus interest. Because all companies had to pay their share, they charged it back to us. It certainly damaged the competitiveness of the industry internationally and probably prevented our British companies from investing elsewhere in another business. The money was all wasted by Labour, as all governments always do waste all the money they are given, so no benefit to anybody.
    Likewise, any ‘energy windfall tax’ will simply be clawed back from people who are trying to keep themselves warm this winter, plus interest. Last year 24,000 old people died of hypothermia during our winter, a shocking statistic. That number is only going to go up as long as the fools are still taxing people on warmth under the convenient guise of trying to avoid the nonexistent ‘global warming’.

  35. Credible
    October 24, 2013

    Because of the EU the dishwasher didn’t clean my plates properly.

    1. Denis Cooper
      October 25, 2013

      To borrow from uanime5:

      “Either provide evidence to support your claim or admit that you just made it up.”

      (Actually it wouldn’t be beyond the realms of possibility that the EU had banned the most effective ingredient in whatever detergent you use … )

  36. Kenneth R Moore
    October 26, 2013

    Good article. it’s a bit rich Major criticising Cameron for being uncaring when his own policies caused :-

    a) People being forced from their homes by sky high mortgages
    b)business failures
    c)a legacy of an unelectable ‘conservative’ party for a generation
    c) A landslide New labour government that caused a massive amount of social and economic damage to Britain.

    Then they made him a Sir!

    1. APL
      October 27, 2013

      Kenneth R Moore: “Then they made him a Sir!”

      There is no such thing as failure if you are a Politician. Look at Kinnock, Mandleson, Clarke, Ashdown.

      They can always dip their hand into your pocket and spend their declining years in the Lords.

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