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Former Prime Minister Calls For One-Off Windfall Tax on Energy Firms

Accountancy & Finance

In the last two weeks, three of the “Big Six” UK energy suppliers have announced inflation-beating price rises for their customers. The price of annual dual fuel bill at SSE rose by 8.2%, British Gas upped theirs by 9.2% and NPower raises theirs by a whopping 10.4%. E.ON , EDF and Scottish Power are expected to follow suit with similar price rises in the coming weeks.


This comes at a time when the Big Six have been accused of making huge profits at the expense of their customers and follows Ed Miliband’s speech at the Labour conference in which he pledged to freeze energy prices until 2017.


Miliband’s policy has been criticised by the energy firms claiming it would prevent them from providing much-needed investment into Britain’s energy infrastructure, and that it could lead to blackouts in the near future.

This week former Prime Minister Sir John Major came up with his own proposal to combat the rise in the cost of energy – At a speech to political journalists on Tuesday he said, “At the moment I do not see how it can be in any way acceptable that with energy prices rising broadly 4 pc in terms of costs that the price for the consumer should rise by 9 to 10 per cent...I do not regard that as acceptable at all by the energy companies.”


He suggests instead a "one-off retrospective" tax should be considered "given the scale of their profits and the unjustified nature of the price increases they have just proposed". He would use the tax to cover the costs of government help to those vulnerable to the cold over the coming winter and suggests this action will be required due to energy companies failing to adequately look after their customers and instead focusing on making more profit.


Major’s comments will come as a blow to David Cameron and the present government who are being forced to deflect criticism that they are being soft on the energy firms. Government ministers responded to this news by reiterating the need for customers to change suppliers regularly and by highlighting the government’s work to force energy companies to put all customers on the cheapest tariff possible.


The reason for the hike in prices is being put down to a combination of an increase in wholesale prices and the impact of green taxes implemented by the government.


The original point of introducing the green taxes was to increase investment in renewable energy in the UK by forcing the energy companies to subsidise the cost of this investment – What has effectively happened in the last few weeks is that the energy companies have rejected this and are passing on the cost of the subsidy by increasing prices to their customers over and above the rise of wholesale costs.


Whether Miliband’s proposal is better than Major’s is up for debate; the problem they both face is in preventing the Big Six in passing on the cost to onto the public in the longer term.

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