You may or may not have noticed the Conservative silence during the ongoing debate about a windfall tax on energy companies. It’s not hard to imagine the internal debate at the top of the party on this one.
Attacking the idea would be sensible and confirm the party’s pro-business credentials. But supporting it could play well in Lower Middle England. Saying nothing would give the Tories the benefit of the doubt either way.
Alan Duncan, shadow business secretary (pictured with David Cameron) broke ranks last night in a phone interview with the FT.
He told me that Labour backbenchers hadn’t stopped to think about how to impose such a levy, since many suppliers are not UK-based companies. Nor had they considered the implications for energy supply and pricing, given that companies’ long-term investment could be restrained by such a tax.
“Whipping up hatred is not a good basis for fair taxation. What matters more than retrospective taxation is properly working competitive markets, which is what [the energy regulator] Ofgem is there to bring about,” said Mr Duncan. “We are seeing old-fashioned socialist hatred converting once again into high taxation.”
I also had a word with Patricia Hewitt, business secretary from 2001 to 2005, who said a levy would be a “very bad idea” because it would be “arbitrary, unpredictable and it would undermine confidence and the climate for future investment”.
Any decision on whether pricing was unfair should be left to Ofgem, said the Labour MP for Leicester West.
Ms Hewitt said: “As a general principle i’m against windfall profit taxes”. She conceded that the first New Labour government had imposed a windfall tax: “We did, and I do think that’s the exception that was acceptable because it was made clear in that situation that privatised utilities had been under-valued at sale. We always made it clear that we were going to impose a windfall tax…to finance the New Deal for young people, there was no surprise about it.
“It was justified in my view and other people’s…but there is no equivalent situation today, and as a general rule I think windfall profit taxes are a very bad idea…In so far as there are concerns about the level of price rises , that is a matter that Ofgem should be asked to investigate to see if there are excessive price rises and whether competition is working.”
Actually, Ofgem is already investigating the energy market and will report next month. I’m told that its staff have the powers to enter the premises of all the power companies to go through their paperwork and this has already taken place. You can presume that the recent rises will form part of the published report. There will also be an emphasis on the “vulnerable” and whether they are being helped or harmed by competition.
In theory Ofgem can impose fines of up to 10 per cent of global turnover if it finds evidence of anti-competitive practices. Recently it hit National Grid with a £42m fine in February.