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The ravings of an individual, UK voter frustrated with our politicians

Posts Tagged ‘windfall tax

E.On UK energy company brag about making more money

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What a complete idiot executive director of E.On, Mark Owen-Lloyd is. At a time when the government is under increasing pressure to apply a windfall tax on energy companies, he brags that a harsh winter will “make us more money”. Obvious yes, but not a very bright thing to say in the current circumstances and it must leave the public questioning the quality of the senior team at E.On. It may have been a quip, but it was idiotic and insensitive, however it was intended to be received.

Perhaps the shareholders of E.On should be reminded, that at a time when raw material prices are rising and therefore the retail prices, additional margins are not because the board are business gurus, it is because even if the margins were maintained at the same percentages as before (and that is questionable), because of the higher revenues, their profits would increase incrementally. So, even if their directors are not as bright as their profits, they would still make more money. So guys, get off your high horse, before you find the public really do start to hit back.

It is ironic and possibly symptomatic, that this idiot felt comfortable making this cheap comment at an Ofgem winter outlook seminar. Ofgem are the very people that should be implementing controls to prevent the energy companies from abusing their domonat positions to make higher profits. Yet, E.On, in the form of Mark Owen-Lloyd, had no concerns in making his comment in front of Ofgem. What does that tell us?

This should really place the spotlight on Ofgem. Either they are ineffectual as a regulator, or they have insufficient powers to take any action. If it is the former, they must buck up their ideas, or head home and soon. If it is the latter, then the government must rush through emergency legislation to beef up their powers, it is likely they will get all party support.

Ofgem needs to ensure that the six principal energy companies do not profiteer from their dominance of the UK energy market. Ofgem should place caps on the energy company prices charged to Uk customers to prevent them from abusing their dominant positions. Why is it for example, that Ofcom in the telecomminications sector, have considerably more success at preventing abuse of dominance than Ofgem?

There are 5m people on prepay meters, there is no justifiable reason why the people using these meters should be charged higher tariffs. The energy companies should be required to bring prepay tariffs in line with their best tariffs. This has to be preferable to the government doling out taxpayers money to assist those in fuel poverty and in turn further boosting the profits of these energy companies.

The government are due to announce that they and the energy companies are going to increase the amount of money invested in improving home energy efficiency for the less well off. Commendable, but not if the rest of us have to pay it in the form of higher bills, because lets face it, we are all under pressure with higher bills, not just those in fuel poverty. In addition, the government must come clean and tell us if they have done a deal whereby the energy companies have agreed to increase their spend on this initiative, but against the backdrop of a secret deal with the government, allowing them to increase customers bills to cover their costs. That would not be a success, it would be a failure.

Given the government is also profiting out of people’s misery, they should be announcing new money, not repeating previous pledges, they can start by returning the £250m they withdrew from the Warm Front project.  We shall be watching very closely at what the government does, how the energy companies are responding and specifically whether or not Ofgem do their job.

I do not agree with a windfall tax on energy companies profits, but I certainly do believe that Ofgem should be ensuring that they do not profit out of the misery of the majority, if they cannot do this simple thing, then the government must replace the Ofgem team immediately.

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Fuel Poverty – The case for creative thinking and solutions

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Within the UK, there is no denying that there are a high number of people in fuel poverty. These include ordinary families on low incomes, pensioners, lone parents, the unemployed and those with long term disabilities and registered as unable to work. In fact, the problem is so large, estimated to be some 4.5m, that the government cannot wave their wand and make the problem go away. That is the long and short of it.

Union leaders and Labour MP’s can huff and puff as much as they like, but the harsh reality is, this government has squandered much of the income it has gained as a consequence of the economic boom, higher taxes and borrowing. This means that the cupboard is bare. The union leaders crying foul, are the same people that fought and succeeded in getter higher wages for their members and in the process, supporting this government. The MP’s bleating, are the same ones that thought the gravy train of higher taxes, followed by waste, was okay. They have themselves, New Labour values and specifically, this government to blame. So there is no point trying to convince us that you are fighting for the ‘people’ when you are as guilty as the rest for the position we all find ourselves in.

It is time to stop the whining and start thinking creatively. It is time to forget trying to fleece the ordinary taxpayer that has spent the last 11 years supporting those that cannot or will not work and propping this government allowing them to claim that they have successfully invested in our services, whilst failing to demonstrate any real tangible benefit to the majority.

The Labour government typically throw money and/or resource at problems in the hope that it will fix the problem, or at least provide a brief respite, perhaps with some good headlines. Their spendthrift ways have lumbered this country with an enormous mountain of debt, which includes official borrowings of £450bn and another £170bn that needs to be paid between now and 2032 on PFI schemes. This ignores the £800bn or so shortfall in government pension schemes. In fact, it is an utter mess, and demonstrates what a tardy bunch this government is. Many of the foolish press barons have hailed Gordon Brown as a prudent or successful chancellor, history will judge him differently.

With nothing in the kitty, ‘working’ taxpayers are so highly taxed through direct, indirect and stealth taxes introduced by this government and with realborrowings at an all time high, there is little room to manoeuvre, even for a government adept at screwing every last penny from the rest of us. Now is the time for new ideas, a bold approach, creativity and above all honesty.

Windfall taxes are a ‘one off’ short term measure with long term consequences, given the energy companies will get the money back somewhere, either by reducing necessary investment, increasing energy cost for the majority, or, most likely a combination of the two. Similarly, throwing money at the problem, assuming we had any, in the guise of fuel credits is knee-jerk and would then be expected every year. The answer is investment in ways to reduce energy consumption through insulation, energy saving appliances and bulbs and other such measures. Estimates suggest that these measures could reduce our energy bills by up to 35%.

The government should encourage the energy companies to invest their carbon credits in the UK rather than elsewhere. They should be incentivised, rather than bullied into offering more support for the Warm Front programme and the government should put back the money they withdrew from the scheme. The energy companies should, however, be forced, by legislation if necessary, to offer the so called ‘social tariffs’ to all those in need and should be prevented from charging higher tariffs for meters on non-direct debit customers. The energy companies have dragged their feet on social tariffs and the penal rates they charge people who use pre-payment meters, this in unacceptable. The regulator should be given more powers to mandate and control issues such as access to social tariffs as well as price rises.

The government then needs to be more creative. Lets face it, at a time like this, everyone needs to pull together. Those in fuel poverty should be encouraged to help themselves, not simply come along to the government expecting more money, which the rest of us will have to pay. Ordinary working families, whether they fall inside or outside the fuel poverty trap are feeling the pinch. Many have had to reduce their expenditure on non-essentials in order that they can meet the higher fuel prices, higher costs in getting to and from work, higher food prices, higher mortgage costs and higher local taxes. They too are suffering, even though they are working, some, many have had to also take on a part-time job in order that they can meet their obligations and keep their head above water. What of these people, the taxpayers that make it possible to support so many that are not working or are retired, don’t they matter?

No solution is going to be perfect, but you can be damned certain, that chucking borrowed money that this country doesn’t have at the problem is going to be much worse. Here are some ideas the government could consider.

  1. Determine which of those in ‘fuel poverty’ are capable of helping themselves with government assistance or encouragement and which are not.
  2. Allow those on fixed incomes, such as lone parents, disability allowances and the unemployed to take on a part-time job (stacking shelves, land work, cleaning houses etc) and retain the income, free of tax, national insurance and, most importantly benefit deductions. The limit for this extra income should be set at a level equivalent to what the government believes is the additional cost of living as a consequence of food and energy increases.
  3. Allow those in ‘fuel poverty’ and in receipt of some form of ‘tax credit’ to earn an additional income through a part-time job, free of tax and national insurance, albeit up to a pre-determined limit, set by the government or better still, experts!
  4. Remove VAT and any other forms of duties on items that are routinely used to save energy, such as, energy saving bulbs, insulation, gas boilers and so on.
  5. Reduce the amount of paperwork pensioners have to complete in order that they can take on a part-time job. Provide them with an additional ‘work credit’ whereby they can earn up to a pre-determined amount, free of tax and national insurance contribution, without affecting their pensions. Increase the work credit by an amount equal to each allowance they do not claim, such as the ‘winter fuel payment’, the savings could be reinvested.
  6. Stop paying the winter fuel allowance to pensioners that no longer reside in the UK and reinvest this money into support for the most needy or energy saving measures.
  7. Provide, if necessary, secured short-term, interest free loans to private landlords, housing associations and local authorities to allow them to bring properties under their control up to acceptable standards in terms of energy efficiency. – A large proportion of homes that need upgrading are in the private sector.

The policy of assuming that there will always be enough taxpayers that can be fleeced to support those that are actually capable of helping themselves in times of need has to stop, it is not sustainable. Yes, if they cannot work, through a genuine disability, age, or lack of mobility then we should offer support, but if they can help themselves, why should they get away scotfree whilst the rest of us pick up the tab through higher taxes and having to take on extra jobs? It is time to view the so called priviledged not as a gravy train, but as the conduit through which those less fortunate can have a better existence.

The truth is, many of those that are capable of helping themselves, probably would if they are in dire straits. However, New Labour has exercised and grown this culture of state intervention, the government will always come to the aid of those less well off. Little or no effort is put into finding out whether they can or are willing to help themselves. If someone on benefit tries to get a part-time job to cover the additional energy costs, they can expect to lose the equivalent amount in state benefits. Why, where is the incentive? I am not suggesting that we should let people abuse the system, just that they are encouraged to help themselves, within limits that relate to their assessed additional needs.

Similarly pensioners are penalised if they work part-time. Clobbered with paperwork and additional taxes, encourage them, don’t penalise them. Government should look to incentivise, cajole and if necessary bully people into helping themselves, rather than transferring the burden onto overburdened taxpayers who are suffering just as badly.

Okay, I accept there are flaws and risks in some of my suggestions, but then I am not an economist or a civil servant. What I do possess is commonsense and a desire to be constructive in my criticism, the former is something the government lacks and the latter something the opposition parties lack. At least my suggestions are a start, perhaps those better qualified than myself can come up with working proposals that encourage those that need help to do more for themselves, thereby reducing the burden on existing taxpayers already facing pressure on their own finances.

 

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Should the UK government impose a windfall tax on energy companies?

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The government is under pressure to impose a windfall tax on energy companies including UK based domestic fuel suppliers as well as international petroleum businesses based in the UK. This is a risky strategy given many of the companies have no particular need to remain in the UK for tax purposes and no longer to we have a favourable business tax system as an incentive to stay. Hence the reason some companies have been moving to places such as southern Ireland because of a better tax regime.

This would not be the first time the government has imposed a windfall tax on energy companies, but the last time, the tax regime was favourable and no doubt many of the companies decided to be pragmatic. But a second raid may be the last straw. I am not advocating that no action should be taken against these companies, only that it must not be quite so blatant as a windfall tax, instead the government could look at the carbon credit scheme, because many energy companies benefitted disproportionatly when the trading scheme was introduced. Some energy companies have clearly taken advantage of the current crisis to boost their own profits and this must be looked at, but simply appearing to ‘punish’ business in such a penal way as a windfall tax smacks of short-termism and desparation. See my recent article here: Windfall tax on the energy companies is not the answer.

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