That Windfall Tax

You know there\’re those screaming for a windfall tax on the huge profits of the energy companies? Tony Woodley was one calling for it I think….Polly another.

Hmm.

Centrica will today announce a near 30pc fall in profits as the surge in wholesale gas prices sent earnings at British Gas tumbling.

Despite pushing up prices to households earlier this year, its British Gas division, which supplies almost 16m of homes and companies across the UK, fell into the red several months ago as gas prices continued to rise. It made profits of just £166m in the first half of the year, compared with £533m in the same period in 2007.

The loss more than outweighs the profit improvement at Centrica\’s upstream business, Centrica Energy, which operates gas fields and produces electricity from its power stations.

For the group as a whole, the company is expected to post operating profits of £880m, against £1.22bn last year.

What huge profits?

The same is going to be true of the distribution and retail arms of all of the energy companies, no?

Update: Remarkably, some sense from Larry Elliott:

All things considered, then, making the energy companies foot the bill for the pain they are causing to voters could seem mightily tempting to Gordon Brown and Alistair Darling.

Yet, things are not quite as clear-cut as they might seem at first glance. British Gas points out that it already pays a 75% tax rate on its gas production and pays a higher rate than any other FTSE 100 company.

It also makes the perfectly valid point that ministers want energy companies to invest billions of pounds in renewables and in a new generation of nuclear power stations, and that clobbering the industry with a windfall tax might not be the best way to achieve that objective.

1 thought on “That Windfall Tax”

  1. Tee hee.

    What the politicians should do here is play to people’s stupid prejudices, scrap VAT on gas and petrol and replace (thus “reducing the cost to hard-pressed households and motorists”) and replace them with turnover taxes of 5% and 15% that cream off those ‘surplus’ profits.

    If you can’t spot the fatal flaw in this ‘logic’, read here.

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