More windfall tax

Would the tax be simply passed on to the consumer?
Businesses say it could lead to higher prices in the long term and even advocates of the tax concede it is a risk. But they also say it would be scandalous if energy companies passed the tax on.

Well, isn\’t that nice?

There\’s only one problem here. Is energy demand by the consumer fixed? That\’s certainly the argument Compass uses: those poor people have to buy the energy to keep warm!

In which case, if demand is fixed, then yes, the tax will be passed on to the consumer.

The only way that it will not be passed on is if an attempt to do so lowers energy consumption: which means that demand isn\’t fixed, which rather obviates the original argument.

Compass really don\’t know what they\’re talking about, do they?

4 thoughts on “More windfall tax”

  1. “But they also say it would be scandalous if energy companies passed the tax on.”

    I also like the fact they acknowledge there is a risk, but that this risk is somehow mitigated because to pass the costs on would be “scandalous”.

  2. Can you talk us through this? If demand is fixed, then energy companies could profit-maximise by doubling, trebling, etc prices. Why don’t they? And if it’s because demand isn’t fixed, but as prices rise people heat their homes less, some of
    whom because they can’t afford to heat their homes, why does is this incompatible with an argument that high energy costs can have negative effects on people’s well-being?

  3. Pingback: Well, der…. « Nation of Shopkeepers

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