Windfall tax: Good for the Country, Good for LabourAugust 29, 2008 12:00 am Leave your thoughts
Imagine a policy that could reverse the decline of Labour’s fortunes, a policy that is not only politically brave but also politically achievable. A policy that is symbolic of what a Labour government should stand for, which is both long and short term, and would help people who are struggling under tumultuous economic conditions.
Imagine a policy that wouldn’t bankrupt the Treasury and that, amazingly, two-thirds of the public would support. While this sounds impossible, we think we’ve found one.
Compass are currently leading a campaign calling for a one-off windfall tax on the unearned profits of the energy and oil companies. Internationally, this is a hugely significant issue. In the US Barack Obama has called for a five-year windfall tax on oil companies and Norway has also taken a much stronger line with energy companies and built up a £100bn fund, ear-marked for future generations, by taxing their North Sea oil and gas operations.
The arguments for a windfall tax are obvious; from individuals and households to small businesses, the prices charged by the energy companies have hit everyone hard. Since 2000 we have faced gas price rises now in excess of 100% and electricity price rises in excess of 61%, both of which are set to increase. At the same time the six big energy providers – British Gas, npower, Scottish and Southern Energy, EDF, E.ON UK, and Scottish Power – have seen their profits rise from £557 million in 2003 to in excess of £3bn. While wholesale gas and electricity prices have increased for the energy companies, this has been more than compensated for by the exponential growth in the cost to the consumer. This boom in profits is unearned and is costing society heavily, pushing thousands more into fuel poverty. We believe that this cannot be allowed to continue, and we are not the only ones. A raft of social and environmental campaigners, political figures and 80 Labour MPs back the campaign – but perhaps more importantly, a Compass/Observer/YouGov poll – has shown overwhelming public support across the classes and the country.
Of the people asked whether they agreed with a windfall tax, two thirds either strongly agreed or agreed. When you dissect this further you see it is popular across the classes. Some 68% of the top-earning ABC1 group either strongly agree or agree and 67% of the lower-earning C2DE group support it. Here is a policy which not only appeals to the so called core Labour vote – currently leaving Labour in floods as the Glasgow East byelection demonstrates – but also appeals to the ever illusive middle classes. For Labour to win again it can’t just appeal to either the middle class or the working class, it has to show that it can meet the needs of everyone in tough economic times. This cross-class coalition of interests is essential and is clearly possible with a sensible centre-left policy such as this.
While that takes care of class, regions also play a major part in the election game. In the past there have always been safe or marginal seats for all the parties, yet Labour can no longer count on its safe seats. It now, more than ever, needs policies which appeal across the country. But again here a windfall tax on unearned profits ticks all of the boxes. This policy is popular throughout the UK, from Scotland to London and the South. Everyone has been dramatically affected by rising prices of electricity and gas.
No doubt the government will come under pressure from the usual suspects at the CBI, with threats that this will affect investment, but as the precedent of the 1997 windfall tax and the independent Institute for Fiscal Studies report (pdf) of it show this is unlikely. There can no longer be any question that this is would be a popular measure and socially just. It is the symbolic and practical policy which could revive Labour’s fortunes; it could show the public whose side the government is on and really make a difference in people’s lives.
This article appeared on Compass.
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This post was written by Zoe Gannon