Friday, August 01, 2008

Windfall Taxes - Will Sense Prevail?

Further to my POST last Monday on this topic, I was pleased to see this piece by Jim Pickard on the FT Westminster Blog which suggests that the Treasury are not actively examining this proposal.

But there is a caveat: "Of course that doesn’t mean that Gordon Brown may not bow to pressure in the autumn and put it in the pre-budget report. It could be a vote-winner. Plenty of siren voices are urging such a move (unions, backbenchers, junior ministers, maybe even some cabinet ministers). But the prime minister is sophisticated enough to know about the downsides. Energy companies can simply put up their prices to compensate for the charge - which would cause even more public anger."

Chris Hannant, head of policy at the British Chambers of Commerce, said: "Imposing a windfall tax on energy company profits won’t bring down the price of energy bills, so consumers and business will lose out. The tax would be a knee-jerk reaction that risks the UK’s ability to attract essential investment needed to secure and upgrade our future power supplies. Failure to gain this investment will mean consumers are even less likely to see any reduction in their bills as the country would remain in a precarious position over supply."

Brown must be desperate to latch onto something that will improve his own (and the Labour Party's) popularity and going ahead with these windfall taxes must be a very big temptation. If he does it would be a very cynical move by a very cynical politician who is prepared to manipulate public opinion in an attempt to save his own neck.

We are always being told that Brown is not afraid to take difficult long-term decisions for the good of the country. I am not so sure he will - or can.