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ASI on the airwaves... Print E-mail
Written by Tom Clougherty   
Thursday, 28 August 2008

ASI Fellow and independent energy analyst Nigel Hawkins was on Radio Five on Tuesday night, discussing demands for a windfall tax on energy companies. He made a series of good points against the idea:

  • High energy prices are largely driven by the soaring cost of gas, not corporate greed. If the government wants to protect people from soaring bills, it should forget about windfall taxes and press on with a new generation of nuclear power plants.
  • If the government does impose a windfall tax, it would create a strong disincentive for energy companies to invest in the UK. Why bother spending vast sums of money on capital investment, if the subsequent profits are going to be seized by the state? A windfall tax would drive away investment in energy right when the UK needs it.
  • While it is true that some energy companies are making record profits, it is also true that they are investing record amounts. It's not just a question of money in shareholders' pockets.
  • Last year energy companies paid £8bn in tax, this year they're paying £16bn – so the government has already done well out of them.

I think that last point is particularly striking – why can't the government use those existing revenues to help people out of 'fuel poverty'? Just a thought – perhaps it's because they're fiscally incontinent, and have already spent the money and borrowed a lot more...

Unsurprisingly, Ian Gibson MP (one of the Labour backbenchers calling for the windfall tax) had a different take. He thinks, "there is too much competition around these days" and that, "we need more national control". Amusingly, he even said, "we need a five-year plan, or a ten-year plan, or whatever". What more can I say?
 

Comments (4)Add Comment
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written by Mark Wadsworth, August 28, 2008
The last point - the fact that the gummmint has already had an extra £8 billion (=£320 per household) is the most important of all. Where is this figure from? It agrees with my magic fag packet but it would be nice to have an 'official' figure.
http://markwadsworth.blogspot....-tax.html
...
written by Toby, August 28, 2008
Five year plan? yea Gods. And he's an MP and can vote on economic expenditure?
Price increase gives windfall profit
written by Dr Alister McFarquhar, August 28, 2008
Price increase has been long regarded as a source of “unearned income” or windfall profit.
In Sri Lanka the marginal rate of tax on tea and other tree crops was 100%. That`s why tea bushes are old and SL tea in British teabags under 20%. This assumes milk is added to counteract tannin.
Decades of export tax on tree crops was encouraged by Kaldor on grounds of inelastic supply. It helped cripple many economies in Africa and Asia.
Ian Gibson MP - Deranged or Dangerous
written by Lola, September 05, 2008
oh it really is getting very tiresome isn't? How do New Labour expect us to take them seriously as aconomically competent if their backbenchers come out with this sort of stuff?

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