Leave aside the question of whether energy companies are charging too much for power. There is the separate question of the European emissions trading scheme (ETS) windfall, addressed elsewhere on this blog.

Earlier this year, Ofgem said power companies had ended up with a £9bn windfall because of a quirk in the scheme. In its second phase polluting companies must buy on average 7 per cent of the permits they need to pollute. For power companies it’s about 30 per cent.

Yet the price of electricity has risen as if companies had to pay for 100 per cent of their permits. Thus the Ofgem figure.

But the £9bn was based on carbon permits at £20 each, whereas the market price is now £25 to £30. That means MPs, unions and others who complain about the ETS windfall can now use a new figure……well north of £11bn.

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.

Rob Marris MP* has just denied that he will quit if the government doesn’t bring in a windfall tax.  

Here are his comments to me over the phone just now:

“It is not correct, I never said that…at least not in terms of resigning over a windfall tax. I wasn’t talking about resigning over anything. I didn’t make myself clear. I never said or indicated that I would resign over a lack of a windfall tax. My position is, a backbencher or junior MP supports his or her government depending on the policies put forward by that party. An extreme example is, if a government announced that they were going to introduce a flat rate of income tax at 20 per cent my enthusiasm for supporting a Labour government would be markedly decreased for obvious reasons.”

“My enthusiasm for remaining a pps depends on the policy. What we need, and I did make this clear, the difficulty facing the Labour government. It’s not the effect of the leadership, but of policy. We need new policies in the autumn, and I’m presuming we’re going to get these. One of these under consideration, and which I’m on record supporting, is a windfall tax, but it is not a deal breaker for me. It is not like 28 days (pre-trial detention of terror suspects), on that I supported 90 days, that is the sort of issue which raises strong views on both sides, a big issue of principle, that is the kind of resigning issue. A windfall tax is not a resigning issue and I never indicated that it was.”

* Rob Marris is MP for Wolverhampton South West and parliamentary private secretary to Shaun Woodward, secretary of state for Northern Ireland

Incidentally, the nearly-80 names of Labour MPs on the Compass petition, calling for a windfall tax….how many have already signed early day motions saying the same thing?

For starters, there are 47 Labour MPs on Fabian Hamilton’s EDM, put forward in January.  There are 35 on Lindsay Hoyle’s EDM, written in July. (He did a previous EDM on this in February, which has 30 Labour signatures). There are 48 on Desmond Turner’s EDM from June. Some MPs will have signed all of these motions.

So the question for Compass is this: How many of your names are new?

UPDATE

Okay, I’ve done the maths. About half the names - 35 by my calculation - have not already signed an EDM on this. There are also dozens of names who HAVE signed EDMs but aren’t on the Compass petition….suggesting that it has the scope to grow, maybe past 100.

So far the group tells me it has 75 on the record, plus 7 “sympathisers”, mostly pps’s, who don’t want to go public.

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

The typical household in the UK has seen disposable income drop by 15 per cent in the last year as food prices and utility bills soar.

Disposable income now represents 28 per cent of average household income, down from 35 per cent a year ago, according to a survey published on Monday by uSwitch.com, the price comparison website. This is the equivalent of £14,520, down from £17,102.

On one level the figures are unsurprising given the well-publicised double-digit rises in the prices of many staples ranging from petrol to a loaf of bread.

But the survey quantifies the pressure on household finances which has helped to erode Labour’s popularity at the ballot box. Prices have risen by 28 per cent for gas, 20 per cent for electricity, 28 per cent for petrol and 25 per cent for food and drink.

The average family is also spending 6 per cent more on mortgage repayments as a result of higher interest rates.

People living in Newcastle are now spending 77 per cent of their net income on bills – far more than the 35 per cent spent by those in Surrey or Buckinghamshire.

It’s not hard to see why the Scottish National party will be campaigning at the next Scottish by-election, Glenrothes, on the cost of living. This was the clinching factor in Glasgow East.  

You could almost feel sorry for Labour…if they hadn’t taken the entire credit when times were good.

For a level-headed news story on Gordon Brown’s position on windfall taxes see this morning’s FT.

The government is considering upping the proportion of carbon permits which energy companies will have to buy in the latest phase of the EU’s emissions trading scheme.  (Until now they have been given the permits for free).

Instead of the proposed 7 per cent a year the figure could be raised to 10 per cent.

By my maths, this is 3 per cent of the estimated £1.5bn annual value of the permits (of which 90 per cent would still be given for free until 2012, when all will have to be bought).

In other words, £50m a year; contrary to most reports.  Even if this is frontloaded it still comes to just £200m over the four years to 2012.

It’s rather a far cry from the “billions” being demanded by the unions and the Labour left.

Sure, there may be other measures: eg making energy companies pay more to help low-income families insulate their homes.   

And there’s an interesting line in this morning’s Guardian suggesting that the government could weight the winter fuel allowance further towards the poor; and not just pensioners of all backgrounds. At the moment this is still at the “option” stage, however.

Chutzpah today from the Tories after the breakdown of talks between EDF and British Energy.

Charles Hendry, shadow energy minister, has put out a statement declaring that: “Time is not on our side, as the government has left it very late to give a firm direction for nuclear.”

This seems a bit rich when - until the back end of last year - the Tory policy was nuclear as a last resort.

It wasn’t until early January that the party made its more positive position clear via Alan Duncan.

Treasury officials are NOT working on potential plans for a windfall tax. That’s what I’m being briefed.

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.

Plus there is the investment issue. Peter Luff, chair of the business select committee, published a report last week which included a call for a (small) tax on profits made through the European emissions trading scheme.

Yesterday he warned that a bigger tax on “excessive profits” would be a disaster, preventing energy companies from putting in new infrastructure investment and storing up a much, much bigger problem 10 years down the line.

Here’s a typical response from business today to newspaper reports that the prime minister is (still) considering a levy:

“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.” (Chris Hannant, head of policy at the British Chambers of Commerce)

*

Oil companies already pay high taxes. Maurice Fitzpatrick, head of tax at Grant Thornton, says the North Sea oil tax works out at about 50-70 per cent (it’s paid as petroleum revenue tax AND corporation tax).

The estimated £15bn of tax from North Sea oil this year is about a quarter of the entire UK corporation tax-take - despite energy accounting for only about 3 per cent of GDP.

One more thing for Labour MPs to worry about. Gordon Brown, or someone advising him, appears to be following the Jimmy Carter political playbook. First it was the cold calls to unsuspecting members of the public, a dubious campaigning tactic pioneered by Mr Carter in 1976. Then there was the appeal to waste no food* and drive electric cars. The call for sacrifice has the ring of Mr Carter’s 1977 address on the energy crisis, a piece of political theatre many Americans find hard to forget.

Sitting by the fireside and sporting a woolly beige cardigan, the president urged people to save energy by putting up with the cold. “All of us must learn to waste less energy,” he said. “Simply by keeping our thermostats, for instance, at 65 degrees in the daytime and 55 degrees at night we could save half the current shortage of natural gas.” It was not his most popular proposal, but it was one of the most memorable.

Without being able to win the confidence of American voters, such statements made it seem as if the president was obsessed with trivia at a time of national crisis. Mr Brown is surely risking the same fate.

Perhaps Mr Brown will lead by example. Mr Carter was so committed to conservation, he installed a wood stove in his living quarters, cut off hot water from some government buildings and turned off the lights on the White House Christmas tree. Can we expect some similar gestures from the prime minister?

* “Isn’t there something supremely ironic about being lectured about food waste by a prime minister who is passed his own sell-by date?” quipped William Hague.