Is a windfall tax on UK energy companies a good idea?
A one off tax on energy suppliers is being proposed by some MP’s to offset the homes in Britain classified as in fuel poverty. Fuel costs have been rising steeply since 2005, but since the credit crunch, people are calling on the government to stop allowing big companies to charge ever escalating costs on ever decreasing family funds. But is this windfall tax really the solution Britain needs?
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Some British families needs urgent help in lieu of this winter.
It is estimated that 5.4 million homes in Britain suffer from fuel poverty, and this figure is set to rise over the winter. Fuel has always been relatively expensive for modern families, but never more so than now when the credit crunch has sunk in. With families trying to cut spending, it is conceivable that there will be families this winter trying to survive with no heating. However, the fear is for the elderly and families who have new babies.
Such families need a fuel benefit to alleviate them from fuel poverty. Gordon Brown in refusing this measure as a serious option is showing himself to be out of touch with modern Britain.
Gordon Brown is not simply pushing this energy matter to one side and leaving those in the fuel poverty group to freeze. He has launched a packet of policies to combat such poverty. One such policy is that energy suppliers will provide £1 billion to be spent over the next three years to improve energy efficiency in households stricken by poverty, or owned by those over 70. Other households will attain a discount on energy saving measures. This will help not only this year, but in future years to come.
Increased profits of energy suppliers, painless relief
There has been an estimated £2.5bn rise in profits for the big six electricity firms since 2003 (1) at the public’s expense. The government has held negotiations with the big suppliers in Britain, and a £50-£100 per head in a household benefit provided for by the companies was conveyed as an idea, but the companies, such as Shell and Npower, rejected such a deal. Instead they suggest households should invest in insulation. Brown should not allow companies dictate the future of British families! The one off windfall tax would be calculated on the basis of what each company earns and will not damage their profits too much.
Ofgem has failed to curb energy prices
Whilst these companies are rolling in the profits, families are getting poorer due to the rising cost of fuel. Lindsay Hoyle MP called Ofgem the ‘toothless tiger’ as it failed to do its job in offsetting the price of fuel for such families. The government should now make up for Ofgem’s failings and force the large, lucrative fuel suppliers, like BP and E.On to cough up.
“Short term gimmicks or giveaways” are not the solution
Brown has fought back against the windfall tax by stating that Britain needs a long term solution rather than a quick fix. The old parable ‘give a man a fish he will eat for a day, teach a man to fish and he will live for a lifetime’ springs to mind. If we provide people with a fuel allowance this year, they will not save the surplus for the following year, they will need another grant! But the point of this windfall tax is that it is supposed to be a one off.
Investors will move abroad as most of them are foreign owned
Most companies that supply fuel to Britain are either foreign owned or multinational. Both have a huge power to just take their business and investments elsewhere if a windfall tax is levied against them, such threats have been made. This would lose us power and employment, and could potentially leave even more households in the fuel poverty bracket.
Tax would only be reflected in even higher fuel prices
Seen as the tax is a one off, the suppliers could easily recuperate their losses to the windfall tax by putting up prices again. What then? Apply a second windfall tax? The problem just circulates with poorer families losing out each time.
We do not want to stop firms from finding new energy sources
In a day and age where environmentalism is taking a hold on us, should we not be made aware of the fact that these fuel suppliers are investing their profits into new fuel sources, such as wind turbines? If the windfall tax was levied against them they may reduce the money spent on British investments to bring their profits back to their regular levels. We cannot change these companies greed, but we can change our own behaviour.
What do you think?