Are they stupid, stupid bastards?
Dear Tim Worstall,
I had no doubt that you would be flying the ‘Do not even think about a windfall tax on energy companies’ flag when I heard the news yesterday about the supposed outrage at Centrica’s £2 billion. The BBC website ran this as their main story for most of yesterday, which wasn’t particularly surprising. Needless to say, Labour don’t really understand the concept of a market and how it works, but your assertion that the government are “stupid, stupid bastards” for considering this move is debatable.
There are several factors that have contributed to this mess, none of which have been discussed in any great depth by the media. For example, these substantial profits are due in part to the EU Emissions Trading Scheme (ETS) which was designed so badly that energy companies were given permits that allowed them to produce vast quantities of pollution for free – thereby completely defeating the point of the ETS. As I’m sure you appreciate, the ETS needs to be altered sooner rather than later to prevent this happening again. In fact, the energy companies got such an easy ride that they factored the cost of buying these pollution permits into their retail prices. Another issue that you rightly pointed out was that energy companies would be able to bring down energy prices if they could discover new reserves of oil and gas, but this obviously requires money and investment that a windfall tax would seriously undermine. Furthermore, the government wants energy companies like Centrica to invest in renewable energy sources, which are still bloody expensive and requires substantial investment.
So, all in all your “stupid, stupid bastards” theory is holding up well. However, from an electoral point of view (which I appreciate you economists are not necessarily concerned about) the windfall tax is almost an inevitability. Labour love hitting the private companies hard with their windfall taxes and Gordon Brown is desperate to reinvigorate his core vote. What better way to make the Labour voters support the Prime Minister than doing what Labour does best – hurting those who make money. We have a government and a Prime Minister in freefall and every newspaper columnist (plus David Miliband) are pointing out that Labour have lost their mission, that they haven’t got a vision for this country. A windfall tax in itself won’t solve this problem, but it will make the Labour voters feel like their party still cares about them.
Whether or not the receipts from a windfall tax are handed out to those in fuel poverty remains to be seen as the Treasury still needs to plug the £2 billion black hole from the 10p tax compensation. Nevertheless, Gordon Brown is looking for quick fixes right now so I suspect that your worst nightmare of a windfall tax will be on its way soon enough.
Yours sincerely,
A.Tory
Witanagemot Blogs
Small note: I’m not an economist. An enthusiastic amateur, yes, but not a fully paid up member of the priestly caste.
Otherwise, yes, you’re right, politics probably will trump economics, as it so often does, to our detriment.
“However, from an electoral point of view (which I appreciate you economists are not necessarily concerned about) the windfall tax is almost an inevitability.”
Yes, I fear you are right. Because it’s not just politicians who are “stupid, stupid bastards”. It’s a fair proportion of the public too…
Plus there seems to be something peculiarly British about naked envy.
You don’t seem to see this so much in other countries, but when the typical Brit sees a millionaire driving past in his Rolls, instead of thinking ‘Oooh, I wish I had a Rolls’, they think ‘Bastard! He’s got my Rolls’.
>> Plus there seems to be something peculiarly
>> British about naked envy.
Yes, I’ve noted this before. This is, at heart, a socialist country. When someone is successful, the reaction is not “well done, you must have worked hard!”, it is “so who did you take advantage of?”.
Then we wonder why people aren’t entrepreneurial enough. Maybe they’re just sick of being spat at.
The media do encourage this view a lot – they are very quick to knock entrepreneurs, and they love a ‘millionaire spends money on tat’ story.
I think it was yesterday that the front page story in one of the red tops (‘Sun’? ‘Mirror’?) was about a sheik flying a car to the UK (I think) to be repaired, the subtext no doubt being ‘Too much money’.
But really, is there nothing else more important going on in the world…?
Yes, the media focuses on celebrities who have become wealthy without doing anything worthwhile, unless you count creaming the money of idiots to be worthwhile. That is part of a general culture which celebrates vacuity at the expense of enterprise, invention, scientific endeavour, pioneering thought, and other things that Jo and Josephine Average fear and hate. The media have a lot to answer for with their celeb “coverage”, printing of horoscopes and other nonsense, and general contempt for their readership (which, unfortunately, is all too justified on many occasions).
I also raise my voice against the National Lottery, which has severed the link between work and earnings and has thereby corroded this country.
We could be living in a new golden age of heroic effort and advance, and my anger stems from the fact that we are too conformist and scared to do what we could.
there is a further dimension ROCs discussed below at TPA.
http://tpa.typepad.com/bettergovernment/2008/07/first-do-no-har.html#comments
Asquith: Can’t argue with you re: the celebtation of vacuity, but:
“I also raise my voice against the National Lottery, which has severed the link between work and earnings and has thereby corroded this country.”
You mean, for the tiny, tiny, infinitesimal percentage of the population that wins mega-millions? Pshaw!
Well Tim, if it makes you feel any better I consider your amateur economist skills to be more enlightening.
The culture of envy is very prevalent in this country, but I wouldn’t say this country is socialist at heart. Pockets of it undoubtedly are, but there are many areas of the country that are very conservative and respect success instead of loathing it. The drive towards the myth of ‘equality’ is more damaging than those socialist idiots realise, as without the drive for success this country is nothing.
I had in mind the millions who cling to vain hopes of getting rich quick, who are mostly on low incomes, who imagine “it could be them” rather than trying to better their lives and being angry at their situation. And if they did win, I wonder whether they’d truly be better off.
Yes, Julia, only a tiny minority actually win the lottery, but Asquith’s argument is that the rest just sit there waiting to win it – in blissful ignorance of exactly what “one in fourteen million” means in real terms.
“I had in mind the millions who cling to vain hopes of getting rich quick, who are mostly on low incomes, who imagine “it could be them” rather than trying to better their lives and being angry at their situation.”
“only a tiny minority actually win the lottery, but Asquith’s argument is that the rest just sit there waiting to win it – in blissful ignorance of exactly what “one in fourteen million” means in real terms”
Well, as long as they aren’t spending the kid’s food money on it, that’s up to them, isn’t it?
I doubt most people spend more than a pound a week, and the money raised does go to good causes (less of it since Labour came in and used it for the bloody Olympics…:().
Thebtraditionla response to that would be to not make a profit by increasing expenses. I wonder how hwrd they can try.
Mr. Letters , I am sure we all respect success but its is hard to argue the galloping board room rake off has anything to do with success it applies equally to failure . You are better off presenting this as a cost of free market systems than a morally uplifting subject for the nations delight .
Vincent Cables article in today’s Independent opposing a windfall tax has no doubt blotted his account with the BBC.