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.

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.

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.

Those outside the Westminster village may be bemused that an op-ed (today’s Guardian) on Labour’s future could be seen as a statement of leadership intent.

David Miliband’s language is carefully coded.

No such doubts exist here though. There are the omissions (no mention of Gordon Brown), the timing (he could have kept his head low) and the criticisms (he says Labour could have done more to improve the NHS).

The rumour is that Number 10 feels betrayed. The word “traitor” has cropped up in conversation.

My colleague Sue Cameron, whose Whitehall contacts are unmatched, writes in this morning’s FT that Miliband should wait instead of risking “doing a Hague”.  

The 43-year old looked defensive this afternoon, saying: “I think that my article today was a challenge to David Cameron and not a challenge to Gordon Brown.”

Well here’s a poll that will cheer up Gordon Brown. A survey of 19,751 people in 20 nations by WorldPublicOpinion.org has found that Mr Brown is the most popular leader in the world (well, almost).

While it is not a resounding vote of confidence, Mr Brown has more positive ratings from countries than any other state leader. Six countries have “a lot” or “some” confidence that he would “do the right thing”. Britons may have had enough of the prime minister, but the good folk of Azerbaijan are clearly full of confidence in his abilities.

The only world leader to emerge with a higher score is Ban Ki Moon, the UN secretary general.
In case you don’t have time can take a look at the full poll results, I’ve picked out some highlights from the report.

- Americans rate Mr Brown more highly than their own president

- But the British have more confidence in both Angela Merkel and Mr Ki Moon

- Support for Mr Brown in Azerbaijan is particularly high, running at 43 per cent. Answers on a postcard please.

- But this is not a touch on Nigeria, where Mr Brown’s eye-watering rating of 59 per cent puts him in a popularity contest with egusi soup and pounded yams (which I am reliably told is the Nigerian equivalent of warm apple pie)

- The poll suggests Mr Brown should stay away from the Middle East, where most citizens place him behind Vladimir Putin, Hu Jintao and Mahmoud Ahmadenejad

- The conclusion drawn by Newsweek from the survey is that strongmen are coming out on top. Yes, that includes Mr Brown.