In the News

Should energy profits be subject to a tax raid?

Graham Watson

6th September 2022

Alex Lawson looks at the case for the government imposing a windfall tax on the UK energy companies, which seems increasingly likely, given the proposed freeze on energy bills that seems to be in the pipeline.

Certainly non-fossil fuel generators have done well out of the current energy crisis - not least the Chief Executive of Drax, Will Gardiner, who's seen a 30% increase in his total pay package. So are they going to effectively fund any prospective freeze in energy bills over the next 18 months.

The impact of the cost of living crisis on SMEs is assessed in this article which highlights how parlous they're in. The Barra Beach Hotel is one of many business contemplating closure in the short-term; without a government plan their energy bills are likely to go up sixfold, and with other costs rising too, they don't think that there will be customers prepared to pay a room rate high enough to make the business viable.

And as if the economic growth/inflation balancing act isn't enough, the Guardian also flags up the fact that there are concerns that the nation faces a balance of payments crisis. With the current account deficit at record levels, and there already being the need for high levels of net capital inflows there are concerns that tax cuts and increased spending are going to see even greater need for capital inflows and that these cannot be guaranteed.

As a result, some fear that the pound is going to depreciate further with all sorts of adverse implications. Watch this space....

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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