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A windfall for social & environmental justice
Wednesday, August 06, 2008
Compass
Rising energy and fuel prices are affecting everyone but it's the poorest and those on fixed incomes who are paying the heaviest price. The warm summer weather will not mask the anxiety and anger at dramatically rising bills for the essentials of life - light and heat. We believe that the moment is right for the government to levy a sensible one off windfall tax to guarantee social and environmental justice both now and in the future. This is why.
The average annual spend on domestic energy per household has now breached £1200. Since 2000 we have faced gas price rises of 100% and electricity price rises of 61% - with further increases including British Gas raising its gas bills by a record 35%. Simultaneously the main energy providers have seen their profits rise from £557 million in 2003 to now over £3 billion. This alongside the recent news of profits made by oil companies - BP is now making £37 million a day with a 23% increase in profits to £6.7 billion for the first 6 months of 2008.
The current spike in the price of oil means these companies are receiving unearned and undeserved windfall profits that are damaging to the rest of society, not least because the unprecedented price rises are fuelling inflation and therefore the cost of borrowing and repaying mortgages.
The government estimates that 2.5 million families are living in fuel poverty, whilst Energywatch puts the figure at over 4 million. Yet despite the billions made in profits, the energy industry spends just £50 million a year combating fuel poverty and has only agreed to raise this to £150 million a year by 2010. But every 10% increase in energy prices mean an extra 400,000 people go into fuel poverty.
At the same time there is a lack of investment in securing renewable energy to help Britain become energy independent and more carbon neutral. By 2020 the UK wants 15% of all energy to be from renewable sources, this is currently only 2%. Increased investment is urgently needed if the government is to meet its target.
Just as government responded to the oil shocks of the 1970s and invested in North Sea oil - to the ongoing benefit of the now privatised energy and oil companies - so government must intervene again to secure sustainable energy supplies for the 21st century and reduce the fear of fuel poverty. It's absolutely right that the corporations who are benefiting from that original investment and the later privatisation pay their fair share to society.
As precedent a similar windfall tax was levied when Labour came to power in 1997 on the unearned profits of the newly privatised utilities and raised £4.5 billion. Similarly in 1981 the Conservative government levied a windfall tax on the main clearing banks - justified on the grounds that increased interest rates led to substantial unearned profits. In 2008 the spike in the price of oil has today lead to substantial unearned profits for the main oil and energy companies - we therefore call on the government to levy a windfall tax.
Revenues from the tax should be ring-fenced to deliver social and environmental justice for all. Part of the money raised should be used to immediately help those struggling with rising fuel bills and should be particularly targeted at families in or facing fuel poverty. However the best strategy to eliminate fuel poverty forever is to ensure every home is insulated and energy efficient to the highest standards. Therefore much of the money raised should be used to kick-start a national programme of home energy efficiency and installing renewable energy, starting with the homes of the fuel poor.
Used in the right way this could benefit the UK economy as a whole - just as the New Deal in 1997 created new jobs for the long term unemployed, such an investment could see the creation of hundreds of thousands of new jobs in renewable energy production, insulation, building renovation and other sectors.
