The scene: A newsroom. The date: September 2008
Reporter (on the phone to Treasury).
“So this windfall tax…”
Official
“It’s not a windfall tax”
Reporter
“OK well it certainly sounds like one. Aren’t you raising billions from the energy companies?”
Official
“Um”
Reporter
“Something to do with ETS?”
Official
“Under the EU’s emissions trading scheme (ETS) companies get permits which allow them to pollute. They can trade these amongst themselves. In the first round they got the permits for free. In the third round, which begins in 2012, they will have to pay for all of them.
In the second round, which has just started, they will have to buy just 7 per cent of the permits on average. That mean figure ranges from electricity companies having to buy over 30 per cent of their permits to steel and cement companies being exempt for now.
The process has already started and will raise £1.7bn-£1.9bn over four years. The money will be frontloaded, with greater cashflow this year and next. So I would imagine you’re looking at well over half a billion before Christmas.”
Reporter
“So it’s not a windfall tax?”
Official
“You can call it whatever you like. Ministers are also thinking about shifting the 7 per cent figure to 10 per cent – the maximum allowed under EU rules at present. That would bring in another £700m or so. And you could frontload the process further to get even more of the money now.”
Reporter
“But there won’t be any clawing back of the estimated £9bn which energy companies have got from their free permits?”
Official
“Well, maybe a smidgeon. If they raise it from 7 to 10 per cent. ”
Reporter
“I’ve just thought of something. I heard that Gordon Brown wants a big giveaway for 7 million families this winter. Up to £150 each to help with bills. That would cost just over £1bn. Maybe this ETS thing could cover that?”
Official
“You might think that. I couldn’t possibly comment.”
10 minutes later
Reporter
“I’ve got this great story. It’s a bit complicated though – have you got five minutes?”
News Editor
“What’s the top line?”
Reporter
“Well, energy companies are paying up a billion, well, much more than that actually, and Gordon will probably use it to help the poor.”
News Editor
“£1bn Windfall Tax on Energy Companies Revealed!”
Reporter
“It’s not really a windfall tax. And we knew it was coming, well, the industry did, apparently.”
News Editor.
“Explain it. But I haven’t got much time.”
Reporter
“Under the EU’s emissions trading scheme (ETS) companies get permits which allow them to….”
News Editor
“Boring”
Headline the next day: “£1bn Windfall Tax on Energy Companies Revealed!”
One week later…
Gordon Brown: “We are raising ONE BILLION POUNDS from the energy companies to help the most vulnerable people in our society with their fuel bills….” cheers from Labour backbenches etc etc
Jim Pickard
Kiran Stacey