Why the Government is failing to use its tax powers effectively

They, like me, will think the measures that the UK government are taking, including enforced “loans” are absurd, and ultimately risk being profoundly unjust, most especially to those on low pay. We can and should be angry in the face of such ineptitude. However, these are not the focus of my attention in the column.

What I am concerned about is something that I think more important, because it underpins the Westminster government’s reactions to this crisis. That other issue is that government’s attitude towards intervention in energy markets. The reason why the government is proposing a wholly inappropriate package of support for consumers in the face of energy price hikes is, I think, fourfold.

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First of all, it is unwilling to challenge market logic. In fact, it reinforces it. That this is the case is apparent from the fact that it has permitted such a massive increase in the energy price cap when it is only really gas prices that have risen. Renewable, hydro and nuclear power generation costs have not changed, but people are being asked to pay more for power generated in these ways because gas has increased in price.

That is absurd, but the government has gone along with this price hike. It makes no sense to do this unless the rules set by the abstract economic theory of markets are being followed, which is what the government is doing at cost to us all.

Instead of pricing energy at the cost of the highest component element within the energy basket, we should be pricing at the average cost across the whole range of energy production resources available to us. The price rise would have been much smaller if this had been done. That’s a price we will all pay for their dogmatic belief in market economics.

Second, it is unwilling to challenge monopoly power. The evidence is again clear. Not only has the government supported energy suppliers whose price rises have driven many energy distribution companies to the wall during this crisis, so reinforcing the power of those supply companies, but it has supported the price rises that they demand, and from which Shell and BP have confirmed they will profit enormously.

The cost of providing this support to monopoly-like energy supply companies is the £9bn government funded support package to consumers that ensures that the energy suppliers can stack away all the profit that they desire.

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Third, the government has shown it does not believe in the power of tax to correct market failing during this crisis. There is an obvious case for a windfall tax on energy suppliers’ profits right now. The increase in prices from which they are profiting result from international shenanigans from the likes of Putin, and not from any entrepreneurial skill on their part. These are entirely unearned profits. They should be subject to tax at a rate of at least 50%, which would still leave them with massive unearned gains. The government’s power to tax does exist, at least in part, to tackle market failures of this type, and to correct them on behalf of society. The government is failing to do that.

Fourth, the government is revealing its utterly naive approach to climate policy when accepting the argument of large oil and gas companies who claim they must be left with these profits so that they can invest in the transition to a sustainable economy.

This is utter nonsense. The likes of Shell and BP invest most of their funds in carbon fuels. Worse, much of this spending is on finding yet more carbon energy resources when what we already know is that we cannot burn all the carbon energy fuel resources if there is to be a chance of human life in the form that we know it surviving on this planet. The government simply ignores this.

So why point all this out? Simply because it says that whilst not all these issues are devolved as yet, they are matters that the SNP and other pro-independence parties and movements have to address if they are to be ready for independence.

Scotland cannot afford policies of the type that this government is pursuing because, to be blunt, no country can. But that needs to be said time and again because an effective pro-people energy policy must be at the core of all politics now. If Scotland is serious about independence noise has to be made on this issue – which has the potential to have more impact on people’s lives than any debate on the currency might have.