Ed Davey calls for Windfall Tax on energy companies to help people cope with rising prices

Ed Davey went on BBC Breakfast this morning to call for a windfall tax on energy companies as BP announced soaring profits for the first three months on this year. Funds raised would be used to give people who are struggling with high bills “a really big tax cut.” Ed said that the Conservatives were totally out of touch with what was going on in the country.

The measures the party is calling for include:

Emergency tax cut: Slashing VAT to 17.5%, saving the average family £600 a year. The move would also keep inflation down by reducing prices in the shops.

Reversing planned tax rises: Scrapping the National Insurance tax hike and the freezing of Income Tax thresholds. This would save the average family £5,550 over the next decade.

Doubling the Warm Homes Discount: Doubling the Warm Homes Discount and expanding it to all those on Universal Credit, taking £300 off the heating bills of around 7.5 million vulnerable and low income households.

Ed said:

There are just 48 hours left before voters across the UK can help us get rid of Boris Johnson and give our great country the decent leadership it deserves so we can help people through the cost of living emergency.

Millions of families are on the brink and desperately need help now but instead they are being clobbered by the Conservatives’ unfair tax hikes. The Government should be stepping up to save families and pensioners yet Boris Johnson is too busy trying to save his own skin with his Government deep in endless sleaze and scandal.

The local elections on Thursday are an opportunity for voters to force Conservative MPs to wake up and smell the coffee. Every vote for the Liberal Democrats will send a clear message that Johnson must go and that people need more help with soaring bills.

We are demanding a fair deal, with an emergency tax cut to save families £600, along with extra support for the more vulnerable – and a P45 for the Prime Minister.”

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This entry was posted in News and Op-eds.


  • Helen Dudden 3rd May '22 - 3:50pm

    Could bringing the energy companies back into the Public Sector be a solution?

  • @Helen Dudden. A good question, but no. The current situation is due to the spiralling cost of the raw materials – oil and gas – on the world market. It has nothing to do with the privatisation of gas and electricity providers in the 1990s, and in fact they are having to buy fuel at much increased prices, and many have gone bust as a result.
    It must be true that the extracting companies like BP are getting oil and gas out of the ground for much the same cost as before the world price went up; if so they are making what can only be called windfall profits. They argue that this bonanza offsets the lean years, when profits were low.
    Shareholders won’t like a windfall tax, and of course, that could include the pension funds of many reading this.

  • Nonconformistradical 3rd May '22 - 4:46pm

    Calendar of BP 1st quarter dividend events at https://www.bp.com/en/global/corporate/investors/information-for-shareholders/dividends.html

    So it seems they won’t announce the sterling share dividend amount until 10 June.

  • Steve Trevethan 3rd May '22 - 5:04pm

    Might nationalisation in a real democracy give power to all customers instead of to a few Neoliberal capitalists?

    “The most common way in which people give up their power is by believing that they do not have any.”
    (Alice Walker)

  • Wind and solar power investors have obviously backed a winner while the cost of fossil fuels remains inflated by shortages. Their costs haven’t gone up, but the market price of electricity has. Would anyone want to hit them with a windfall tax ? They are the good guys, after all, compared with Shell and BP.

  • Laurence Cox 3rd May '22 - 5:24pm

    I went down the route of joining a co-op to develop a wind farm. As the maximum investment corresponds to 120% of your electricity consumption, it isn’t as much an investment as a way of limiting your electricity costs: https://rippleenergy.com/

  • Barry Lofty 3rd May '22 - 5:28pm

    To be honest even the green energy suppliers will seek to make a killing, in a capitalist world that how it works whether we like it or not, they are business men and women at the end of the day!

  • @Steve Trevethan, privatising the power companies brought about cost-cutting and increased innovation, and they operate more effectively and efficiently now than when they were state-owned.
    Ofgem protects the interests of customers, just as the Ministry of Power would if the companies were bought back by the government, but profits, share-price growth, and bonuses motivate people to make improvements; memos from civil servants, who wouldn’t understand the real business issues, don’t.
    Re-nationalising the power companies would be expensive, and would deliver little or nothing in the way of benefits. I’m afraid the idea that it would give customers ‘more power’ makes no sense to me. Perhaps those who advocate that could tell us what they would do differently with gas or electricity networks, or electricity generation and transmission, if they became state assets.

  • Steve Trvethan 3rd May '22 - 6:56pm

    Might a difference with democratic nationalisation be that profits went to the many and not to a somewhat self interested few (shareholders and senior execs?)?

  • Mick Taylor 3rd May '22 - 7:38pm

    Andy Dear. What country are you living in if you believe that privatisation of power companies led to innovation and more efficiency?
    The only people who benefitted from privatisation have been directors and shareholders, certainly not the consumers who foot the bill for huge salaries and bonuses and face rising prices because of the greed of private owners.
    As for shareholders not liking a windfall tax, so what. Why should they reap huge benefit from windfall profits?
    Common ownership would not prevent price rises in international markets, but it would be possible to keep price rises down without the need to pay shareholders and to spread them out over a longer period.

  • mick taylor 3rd May '22 - 7:39pm

    Bloody predictive text! Daer not Dear

  • It strikes me that rather than expensive nationalisation of assets that are currently held by share-holders, government and/or co-operative style businesses, should set up their own rival versions.

    The private companies can continue to innovate to improve efficiency and customer experience, while the non-profit ones would have the advantage of not having to cream a portion of the profits for share-holders. The public companies would benefit from learning from/competing with the innovation of private industry whilst the private businesses would be forced to keep their prices competitive with the company not fixated with dividends. The public can chose which they like best.

  • Andy Daer 3rd May ’22 – 5:39pm……….Perhaps those who advocate that could tell us what they would do differently with gas or electricity networks, or electricity generation and transmission, if they became state assets………………

    Well 77yo ‘Elsie’wouldn’t need to ride buses all day….EDF has raised its energy prices in France by just 4%, compared to the 54% increase consumers in UK have now been hit with…..
    And one thing is certain EDF won’t go out of business because of being limited to the 4% rise

    As for ‘innovation’ Britain’s much vaunted Hinckley C ..Funded by France’s EDF and China’s General Nuclear Power Group

  • Colin Paine 3rd May '22 - 11:20pm

    Have we just merged with Labour? Ed Davey’s statements are indistinguishable from Starmer’s these days. Not sure how he proposes to pay for Covid without raising any taxes at all.

  • @Mick Taylor, please consider the following. Electricity network operators are required to reduce the average amount of time consumers are off supply due to faults (and a slow response by repair teams). Your state-owned company chairman is told by civil servants to cut the average by 10 minutes, or else the minister might face embarrassment. The privatised company CEO is told to do the same, or else he’ll lose his £100k performance bonus. Which company’s customers would see an improvement? Now change that to a more realistic figure – the CEO’s performance bonus is £1m. A better incentive than a memo on Ministry of Power headed paper? An annual bonus of £1m costs the consumer something like 20p a year. And on top of that, remember that poorly performing companies get taken over, in which case the CEO gets fired.
    You ask what country I am living in, but more to the point is where I worked for 38 years – in what is now an electricity network operator, before, during and after privatisation, and for most of that time in the finance department. My comments are not hypothetical.
    No-one wants to see the phrase ‘greed is good’ in the pages of the LDV, but sometimes it is actually true.

  • @expats, first, nearly all of France’s electricity comes from nuclear power stations, so it shouldn’t be a surprise that edf hasn’t been hit by the hike in fossil fuel prices.
    On the bigger point about re-nationalisation (and that lady sitting on a bus to keep warm) King Canute made the point a long time ago that no-one can halt an incoming tide. The fossil fuel element of electricity generation has to be paid for, and that wouldn’t change if the state owned the gas and electricity companies. However, there would be the option of holding down the price to consumers, but that would mean passing the burden to tax-payers.
    In a lot of cases these would be the same people, but it is true that the poorest might not be paying income tax. However, buying back the electricity companies and subsidising everyone’s bill is a heavy-handed way to achieve that element of fairness – and would it be right for the better off to have cheaper energy at a time when climate change is such a threat ?
    Wouldn’t it be better to invent a way to target cash specifically at the people with the lowest income ? By a stroke of luck, we already have such a system, and some might say it’s “oven-ready” – Universal Benefit.

  • Nonconformistradical 4th May '22 - 8:01am

    “The privatised company CEO is told to do the same, or else he’ll lose his £100k performance bonus.”

    Does that ever happen in practice? Are rewards for failure (in many sectors of the economy) one of the major problems?

  • Andy Daer 4th May ’22 – 7:18am……………[email protected], first, nearly all of France’s electricity comes from nuclear power stations, so it shouldn’t be a surprise that edf hasn’t been hit by the hike in fossil fuel prices………..

    Why? because the massive investment was made by the STATE; where-as our private companies were more interested in short term profit..
    As for climate change; around 21% of France’s energy comes from ‘renewables’ compared to around 6% in the UK..

    BTW…Long before the P&O scandal British Gas owner Centrica came up with idea to boost profits by around £100m thanks to their ‘fire and rehire’ scheme.

    I’m afraid that your ‘public = bad…private = good’ is what has got us to our current (no pun intended) dilemma..

  • Chris Moore 4th May '22 - 8:52am

    Hello expats,

    Close to 40% of UK electricity generation is from renewables. There has been rapid growth in off-shore wind.

    France opted for nuclear several decades ago; the UK state which then controlled energy generation chose not to go down that route. I believe that was a mistake.

  • Chris Moore 4th May '22 - 8:58am

    Overall energy use: the last time I looked UK was 20%+ renewables, somewhat ahead of France.

    That figure could increase rapidly, if we move to electric transport.

  • @Nonconformistradical 22 May 8:01am, in the privatised network operation business, the system works like this: Ofgem sets targets which have rewards and penalties attached, and the companies set profit targets for their directors and senior staff. The penalties are significant numbers of £m. If the profits are hit by either a penalty or failure to get an expected reward, that should reduce the size of the bonuses. When you ask “does this happen”, yes it does, but as I said earlier, CEOs are highly motivated to hit the targets, so losing their bonuses doesn’t happen often.
    Regarding “rewards for failure”, that does seem to be happening in the water industry, where bonuses are being paid despite record numbers of raw sewage outflows. I haven’t worked in that industry, but suspect it must be due to poor regulation by Ofwat. As with the other utilities, I would suggest that buying back the water companies would cost billions, and wouldn’t achieve anything that can’t be done by better regulation.

  • @Chris Moore 4th May ’22 – 8:52am..

    Chris, I didn’t mention ‘electricity’; I said ‘energy’…

    It has been well over 30 years since privatisation; ample time to plan ahead..

    Though there has been an influx of smaller companies in recent years (many of who have now gone ‘bust’ leaving their customers at the mercy of the ‘big six’), the energy market is dominated by a handful of large companies: Centrica, the parent of British Gas, EDF Energy UK, E.ON UK, npower, Scottish Power and Ovo. They control around 80% of the UK household energy market. In addition to charging higher prices to consumers, the energy companies display many of the maligned characteristics associated with oligopolies: fat profit margins, use of outsourcing and layoffs, the funnelling of billions of pounds to shareholders through dividend payments and what the Office of Fair Trading as a deliberate ‘confusopoly” of tariffs..
    Anyway, privatisation failed to deliverthe promised lower prices; the opposite has occurred. Even before the current energy crisis began, domestic energy bills steadily increased in “real” (ie inflation-adjusted) terms by 50% from 1996 to 2018. Those rises are just a fraction of the 2022/23 rises which will leave millions of households in in fuel poverty.
    In short, the weakest (like ‘Elsie’) willl ‘go to the wall’

  • Barry Lofty 4th May '22 - 10:49am

    My belief is that the watchdogs set up to regulate our utilities seem to lack the necessary muscle to properly do their job and governments past and present, have been extremely lax in their defence of the public interest, maybe the scandals during the pandemic give a clue as to why that happens.

  • Couple of points from above comments:
    1. Investment in power and transmission systems is heavily and increasingly limited by the regulator, in recent years probably cutting back too much on what it allows DNOs, TOs and generating companies should be investing. This could have long term consequences.
    2. Nuclear wasn’t privatised in 1990 due to the city being unwilling to underwrite the cost of privatisation due to the potential (and since then proven) high costs of decommissioning existing nuclear power stations and the long term waste storage. As a result Thatcher pulled the nuclear element out of electricity privatisation rather than lose key legislation.
    3. I’m not too keen in privatisation (neither am I a cheerleader for privatisation) as seeing how the old CEGB operated was somewhat opaque in any democratic control, often seen as the heavy hand of government when say a new large power station was proposed/built. Intelligent regulation should be able to achieve much the same, even windfall profits.

  • @Colin – I think we were the first to suggest a windfall tax before Labour did, but given that the Tories and SNP don’t support a windfall tax on the oil and gas sector, would not supporting one mean we’ve merged with them?

    The costs of dealing with COVID should be treated like a war debt. Something that does need to be paid off, but to be paid off over a longer period of time. Our current priority needs to be supporting those most hit by the cost of living crisis and part of that is getting the economy back up and running. Or at the very least, trying not to hammer the small businesses that have just about survived the last two years.

  • Helen Dudden 6th May '22 - 9:56am

    It should be a key factor, that those who took government funding for PPE that was not usable repay any profits and compensate the government.

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