b) the pensioners who’re hit by fuel poverty are the few really poor ones reliant on benefits (by ‘few’ I mean that pensioners are less likely to be in extreme poverty than non-pensioners, partly because they get more generous benefits than everyone else); the ones who benefit from rising BP share prices are the others.

That’s a moronic point - BP isn’t a chap in a top hat smoking cigars, it’s several million people’s pension funds.

It amazes how many of you criticising the tax that oil companies have to pay when a company like BP makes £6.75 billion a year, a 23% increase on last year. Wait a minute, what BP makes in an hour, someone on the minimum wage would need to work over two years to make the same amount.

The windfall tax will fall mostly on the petrol companies because demand for oil is more elastic than supply. The proceeds for the tax will make energy cheaper (i.e. investment in better insulation) and more sustainable (i.e. investment in renewables) for people. The cost of insulation and renewable energy is much more elastic than the cost of petrol (unless you think the UK can buy off OPEP and at the same time prevent any externalities affecting the cost?), so with greater investment to make sustainable energy solutions cheaper, people will see which energies are the most cost-effective for them. Unless the cost of oil goes down, private investors will be more likely to put their money in these solutions too, especially if they aren’t as affected by externalities that petrol is impacted by. I forgot, this also creates jobs in that sector…

Obviously, windfall tax isn’t the only answer, we could also introduce smart tariffs for energy where people would get access to cheaper energy up to a reasonable level and then charge higher rates if you consume more than that.

Royal Dutch Shell, BP, Gazprom, Aramco are indeed all making stupendously large amounts of money out of $120 oil, because their job is to get oil and gas out of the ground and sell it to other people. EDF, RWE and EON are not, because their job is to pay the first lot the market price for oil and gas, convert it to electricity, and sell it to us.

Oil and gas companies in the North Sea are indeed taxed at an enormous rate, and North Sea tax revenues does indeed increase dramatically when oil prices are high. But we can’t tax the foreign oil and gas companies who get oil out of the ground in foreign countries - and they’re the ones who’re doing most of the syphoning.

That would be the governments in taxation. Either through the State owned companies that actually do a lot of the pumping (Aramco etc) or through royalties and profit taxes on those private sector companies. British Gas, for example, pays 75% profit tax on it gas from the North Sea. North Sea oil pays royalties plus (I think) 50% profit tax.

It is a fallacy to suggest that it is redistributive in any meaningful sense because the underlying conditions remain the same, unless the one-off tax becomes part of the regular practise of budget measures punishing acceptable behaviour for having unacceptable consequences - in which case it isn’t either a ‘windfall’ or a one-off.

Historically speaking Income Tax was considered acceptable only on a one-off basis - that is until the political elites discovered that it was politically expedient to bow to the pressure of growing proletarian power for the state to provide social services. Exactly how many wars have been stopped by widespread tax rebellions?

The fact is that taxation does nothing to effectively redistribute direct power because power is based on the ability to create wealth not wealth itself and taxation limits economic choice, so supporters of this petition are wrong if they do so on a redistributive basis.

Like Thomas I’m less interested in the economics of this situation, given that I understand now you’re talking not about long term solutions it’s clear how political this is. I’d be able to support the idea of a windfall tax if it wasn’t for the government taking with the other hand from the poor at the same time.

Giving the government the authority of public pressure to introduce more taxes (this time on corporations) while they’re happy to siphon off an increasing amount of money from the social housing market (£200mil this year), and raise taxes that disproportionately affect the poor, you’re not solving the problem of funding a strategic future and security for energy. But then I guess in line with Thomas’ point it is hard to simply hold Brown to ransom if you’re actively going out there and making a big deal about how Labour are no longer about being “fair” to the poor and have no wish to be?

The point I’d raise is that the politics of Neal Lawson and Co producing a petition for a winfall tax are far more interesting than the economics.

Whether or not the petition succeeds in getting what it calls for is less important than satisfying the demand for Labour to be seen to be helping the poor (ie those in fuel poverty), whether the facts bear out the theory or not.

The supporters of a windfall tax are those on the left of Labour and they know they have to play to their constituency in order to win their votes come the election. So this is effectively holding the leadership of the party to ransom while threatening to coalesce potential rebels who might form a breakaway group or mount a coup to overthrow Brown.

Ultimately which side wins control of the leadership comes down to pure political calculation whether there are more votes on the left than in the centre, but one thing is certain it shows how weak Brown is.

For the (I’m not sure, is it the 4th or) 3rd time now, golden parachutes are not a “market” anything. They can be seen by you and me as a company failing, but they are not a market policy. Shareholders rights could well be increased, but this is already happening, without extra regulation.

“My point here is two-fold: that right-wingers say very little about this kind of market failure”

When you’re mis-characterising a corporate policy as “market failure”, they probably get tired of repeating themselves.

“This sounds a bit like when left-wingers try to blame crime entirely on social conditions.”

I’m not blaming it entirely on anything, as you might have noticed. I gave a list of people who could be considered to blame. There are specific cases where it hasn’t happened for reasons of national macroeconomic stability, but in general the biggest losers have been shareholders in the financial companies. Not the “grannies” I keep hearing about.

“More regulation would do that.”

More regulation would not stop boom and bust. That’s getting rather silly.

“And all the arguments against it (my grannies shares will fall! People will throw that money away on fuel bills!) are pretty lame.”

Or.. it’s just a bad policy that won’t actually achieve its aim. But then, never let logic get in the way of a rant.

“but it can prevent markets tipping over, as clearly would have happened”

No, regulation would not have prevented this current bust.

“if Freddie Mac and Fannie Mae were allowed to go bust. I suppose you’re also opposing the Feds supporting them?”

I believe we’ve been over this. I didn’t support the creation of F/F, and their leeway to leave their original brief (low-end mortgages) was dangerous and myopic. While you see their fall as “death to free-market theory”, a free-marketer wouldn’t have created them in the first place, and most certainly wouldn’t have let them become general-mortgage-sucking behemoths.

“No, my point was that right-wing thinking is pretty much exhausted right now”

To be fair, the only person calling me right-wing is.. you. If we were talking about changes to personal income tax, or sales tax, or most other issues, I’d probably fall slightly left of centre. But, I understand that drawing me as some hard-right type makes it easier to dismiss my arguments.

“markets will self-correct painlessly and that everyone will come out happier.”

Wrong, and wrong. Where did I mention “painlessly” or “happier”? Readjustments are always painful, and rarely create happiness. However, they are necessary. And, yes, the market will correct itself, as it is already in the process of doing. All I’m saying is that emotionally-driven, hasty legislation in the aftermath of downturns very rarely turn out to be sensible. If you want to clip the tails of business, it makes more sense to do it on the way up.

“no way as dangerous as various people are making it out to be”

Not dangerous, just stupid.

I’m perfectly aware of basic economic theory, thanks, I did spend four years studying it at University. My point here is that you should occasionally try economic reality instead of just theory.

So for example:

You’re obviously correct that the market hasn’t “self-corrected” this but if you knew a little more economics you’d know that this isn’t something that right wingers ignore.

Great! If you could point me to the reams of outrage about the massive pay-offs and fatcat salaries I’d be grateful.

It’s also not unique to private business: an MP or a Minister gets a pay off when they lose office, that’s a reward for failure, isn’t it?

And I’m opposed to that too, but ministers usually get the equivalent of redundancy payments which don’t amount to tens of millions of dollars/pounds. So the scale is completely different. Besides, isn’t this an admission then that the private sector is worse than the public sector?

Thus the entire increase in the price has indeed been as a result of an increase in demand. But then that’s economics….

This is what I mean by wishful thinking. No doubt strong demand from China has played a part, but you don’t think uncertainty in the Middle East and the Iraq war has played a part? This simple demand / supply equation is fantasy.

No, Tim is assuming that the money taken from gas companies would be spent on finding gas: and that oil on oil but….there is also the point that by reducing the profits of those already in the industry you deter new entrants.

The oil companies make most of their profits from oil exploration anyway - so there’s very low possibility they’ll stop this anytime soon.

Secondly, the abnormally high profits in fact make it harder for new entrants to come in and compete on equal terms. This is also basic economic theory.

They’re a signal to hte market that extra profits are available in a certain sector.

Yes…. because it signals to the market that there isn’;t enough competition in that sector. Get with the programme Tim.

No, when the Bear Stearns shareholders, as the Northern Rock ones, were wiped out, that’s when us free marketeers (who you bizarrely seem to think are right wingers) began to win the argument

NOt sure what your point is here. The Bear Sterns collapse caused enough ripples that had the potential to bring down the financial system to ruin, otherwise the Fed wouldn’t have to step in. Meanwhile, there was barely a squeak from free-marketers, or nothing substantial that reflected the real world.

Similarly, the bailing out of Freddie Mac and Fannie Mae says that the pure free marketers lost the argument: clearly the market doesn’t correct early enough, and that the whole system itself was in danger of going under given market conditions.
If it had been allowed to go under, as many free marketers would have advocated (is that what you’d advocate?) then free marketism would be as popular as the bubonic plague over the coming decades.

Sticking a windfall tax on utilities is less sensible, given that they’re paying more for the gas they buy - the problem is that oil and gas are more expensive, not that E.ON and RWE are fatcats. If we are going to do it, we should certainly spend it on energy efficiency - and not on allowing people to use more energy that they shouldn’t be using.

What’s wrong with wearing a jumper in the winter, anyway?

It’s an interesting example of a completely untrue meme becoming received fact, certainly.

The primary practical consequence of a windfall tax on energy companies now would be that investors would expect it to happen again when they made good profits in energy. They will therefore invest less in finding new, profitable energy sources; renewable or non-renewable. Energy prices will therefore stay higher than necessary.

I am infavour of substantial taxes on energy, but for heavens sake do it in a considered way taking the long view. Lashing about with a windfall tax will only do harm.