News from Labour Matters

Windfall tax may be part of new economic plan

A windfall tax on the profits of energy companies may become part of a new economic plan set to be unveiled in September, it was revealed today.

A one-off tax on the increased profits of the energy companies was recently proposed by Tony Woodley, joint leader of the Unite union, but has been more widely backed after half year profits from leading energy giants were announced to be sharply increased.

Centrica, the company which owns British Gas, yesterday unveiled profits of almost £1 billion only a day after clobbering 16 million customers with a 35 per cent increase in prices. Shell announced record profits of just under £8 billion, and earlier this week BP unveiled £6.75 billion in profits.

Tony Woodley said that “these latest vast profits now put the case for a windfall tax on big oil companies beyond argument. The Government should grasp the nettle and do what it did in 1997 by taxing grotesque profits and put the proceeds into helping the millions of people struggling with their fuel bills.”

And today it seems that the Government is considering doing just that, as part of a wider series of economic measures designed to tackle the effects of the credit crunch and higher prices on ordinary people’s pockets. The new economic measures are planned as part of a wide-ranging change of direction to address changing circumstances, which Ministers also hope will start to revive flagging fortunes for Labour.

Support for a windfall tax on energy giants is not universally supported within Labour ranks however, with Energy Minister Malcolm Wicks urged caution saying that it was a matter for the Chancellor, but “It’s tempting to play a populist card but I do not think that would be responsible.”

The Conservatives are deeply divided on the prospect of taxing excess profits, despite the fact that Mrs Thatcher did so against the Banks in 1981.

The Conservative-run Local Government Association yesterday called for a tax of £500 million a year for the next ten years on six energy suppliers: British Gas, EDF, Npower, Eon, Scottish & Southern Electricity and Scottish Power. But Charles Hendry, the shadow energy minister, said: “I can see that there might be political pressure on the government to do that, but it doesn’t mean its the right thing to do.” Adding that “there has got to be an enormous amount of investment” in future years to improve energy supply in Britain.

The argument that a windfall tax would threaten the energy companies’ ability to invest in the future was dealt a severe blow however, when it was revealed that British Gas investors alone look set to receive £500 million in increased dividends and that top executives are to receive bonuses greater than the average person’s annual salary.

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