Sir John Major calls for windfall tax on energy profits

 

Sir John Major: "People will have to choose between keeping warm and eating"

Former prime minister Sir John Major has called for an emergency tax on the profits of the UK's top energy firms.

The ex-Conservative leader said recent price rises of more than 10% were "unacceptable" and action was needed.

The government could claw back the cost of extra winter fuel payments through a one-off tax, he suggested.

Downing Street said there was no such plan but called Sir John's comments "interesting". Energy firms said they were helping customers keep bills down.

Ministers have rejected a call by Labour leader Ed Miliband for a price freeze, describing it as a "con" and urging hard-pressed consumers to switch suppliers instead.

'Reasonable'

Three of the "big six" energy firms - Npower, SSE, and British Gas - have announced plans to raise gas and electricity bills by between 8% and 10%. Analysts expect the others - Scottish Power, E.On and EDF - to follow suit with similar price increases.

Speaking at a lunch for political journalists, Sir John - prime minister between 1990 and 1997 - said price rises of this kind were not justified and it would be "entirely reasonable" for the government to impose a one-off levy to recover the cost of cold weather payments this winter.

Analysis

John Major doesn't say much these days, at least not in public.

But when he does it tends to have impact.

He was the last Conservative leader to win a general election, polling 14 million votes - more than any prime minister before or since.

On the face of it, his windfall tax idea deals a serious blow to David Cameron.

He may have been careful to dismiss Ed Miliband's call for a price freeze.

But his intervention adds fuel to the Labour leader's claim that Mr Cameron is standing up for the energy companies, not consumers.

Yet this is a man who, although not on the Conservative payroll anymore, is very much in the David Cameron camp.

Lobbing in this idea might help Mr Cameron shift position on this highly-charged issue without looking like he is dancing to Labour's tune.

Although there are no indications so far that Downing Street is planning a change of heart.

Cold weather payments are triggered when the temperature falls below a certain level for a prolonged period.

Those on income support and other work-related benefits are eligible for a £25 payment if temperatures drop to zero degrees Celsius or below for seven consecutive days.

Fuel poverty campaigners have said the price rises will leave some people with the choice of having to "heat or eat" this winter but energy firms say they are needed to cover the cost of rising wholesale prices and environmental obligations.

Asked about Labour's plan for price freeze if it is elected in 2015, Sir John said "Ed Miliband's heart was in the right place but his head has gone walkabout", adding that the plan was unworkable.

"But he did touch on an issue that's very important. The private sector is something the Conservative party support but when the private sector goes wrong or behaves badly I think it is entirely right to make changes and put it right.

"At the moment I do not see how it can be in any way acceptable that with energy prices rising broadly 4% in terms of costs that the price to the consumer should rise by the 9-10% that we are hearing."

He later told the BBC that the was a "crisis" in the energy market and there was a "very real chance" that the government would have to increase the amount of assistance it gave to people in the event of cold snap.

PAST WINDFALL TAXES

  • 2009: Labour tax on bankers' bonuses
  • 1997: Labour levy on the profits of energy giants and other formerly state-owned firms privatised since the 1980s
  • 1981: Conservative tax on oil and bank profits

Should this happen, he said a "one-off retrospective" tax should be considered "given the scale of their (energy firms') profits and the unjustified nature of the price increases they have just proposed".

The BBC News Channel's chief political correspondent Norman Smith said the prime minister and his chancellor were instinctively opposed to short-term fixes and believed only action on competition and supply would reduce bills.

But he said intervention from such a senior figure would increase pressure on them to do something.

In response to the ex-PM's comments, Ed Miliband tweeted: "Sir John Major makes Labour's argument: David Cameron stands up for the energy companies not hard-pressed families."

Shadow energy secretary Caroline Flint said the former PM was "joining a chorus of voices who are concerned about the way the public has been left out of pocket".

But she said Labour opposed a windfall tax, as it would be complicated and it was unclear how it would benefit consumers, while a price freeze was a "simple measure" to give consumers immediate respite.

The government has said the price rises are "disappointing" but has insisted a price freeze could actually lead to higher prices in the long-term and what is needed is more competition.

Caroline Flint rejects Sir John Major's windfall tax plan

"There are a number of initiatives that the government has to support vulnerable people, such as the cold weather payments," a No 10 spokesman said. "We have a range of ways in which support is given and those are the right ones."

Conservative business minister Michael Fallon said: "It's an interesting idea but we think a faster way to bear down on prices is more competition, simpler tariffs and making it much easier for people to switch to a cheaper supplier."

The Energy UK trade association said: "No one should be afraid to put the heating on this winter. If customers are worried they should get in touch with their energy supplier and they should be able to help.

"The energy industry is doing an increasing amount to help vulnerable customers and we will be looking at what more can be done to help people worried about their bills."

The bosses of the leading energy firms have been called to appear before MPs next week to explain the price rises.

Earlier on Tuesday, Scottish Power was told to pay £8.5m to many of its customers after being found to have misled them about the benefits of switching to alternative suppliers and other breaches of its licence obligations.

More than 140,000 customers on the warm homes discount schemes, designed to support those at risk of fuel poverty, will receive about £50 in compensation each.

 

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  • rate this
    +211

    Comment number 30.

    Interesting. Major rarely comments on current affairs these days so people tend to listen when he does.

    He is of course also the last Conservative leader to actually win a general election.

  • rate this
    +107

    Comment number 20.

    A windfall tax would only be passed on to customers as a further price rise.

    A greater focus on renewable resources, and renationalisaton of energy production/generation is what is needed.

  • rate this
    +216

    Comment number 12.

    And what's to stop them increasing prices to compensate for the windfall tax?
    The synchronised price rises - independent of any underlying surge in wholesale prices - show that there isn't a real competitive market. In the absence of a free market, consumers will get stitched up.

  • rate this
    +372

    Comment number 6.

    First you privatise energy companies, allowing them to make profits (at our expense), - then you tax them when they start being greedy.

    Wouldn't it be better just to nationalise them so any profits remain in the public purse?

    I just don't see how shareholders and bosses taking money from the company benefits the public at all, we just end up paying more for our energy.

 
 

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