r/unitedkingdom • u/Tartan_Samurai • May 27 '23
Energy companies making 'war profits' - Reeves
https://www.bbc.co.uk/news/uk-6573095074
u/ahorne155 May 27 '23
This shouldn't be a windfall tax as the government will just squander the money, they should be made to pay it directly back to their customers through gas and electricity bill refunds..oil is a bit more tricky but I'm sure something could be worked out at the pump such as a 10% discount card for everyone and government monitoring of price fixing at the forecourt..
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u/davus_maximus May 27 '23
Now that's a strong argument. I also believe that the government would piss any tax windfall up the wall. Just look at the PPE scandal. They'd never spend it for public benefit. I'd suggest the money be ringfenced for infrastructure and road building, but I don't think they get especially good deals from the contractors, either. Your suggestion is probably a huge economic win, almost like the US stimulus cheques.
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u/DavIantt May 27 '23
That is a good idea, the people know their situation as well as anyone else. All the parties have a track record of spaffing money up the wall when in government (including devolved assemblies).
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u/durand101 Free movement is a human right May 28 '23
The profits are being made primarily by BP and Shell, not our utilities (except where they own gas production or certain generators). The only way to get money back to consumers is by taxing O&G companies or generation companies.
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May 28 '23
Most of those profits are on fossil fuels extracted and sold internationally as stated in the article.
If the UK taxes those profits, these companies are going to look at rebasing their registered offices elsewhere.
The countries in which these fossil fuels are extracted will be happy to support that, and there is nothing we can do about it, short of invading these countries.
It's also not clear on principles of fairness why e.g. profit on gas extracted from Norway that it is then sold in France should be seized by the British government to pay for domestic expenditure.
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u/vishbar Hampshire May 27 '23
This is silly and doesn’t make any sense, though. The upstream producers are making profit, not the downstream suppliers.
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u/Gameplan492 May 27 '23
So regulate the upstream suppliers then. The idea that this is an argument against taking any action is ridiculous.
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u/amegaproxy May 27 '23
So regulate the upstream suppliers then.
How do you propose doing this?
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u/TeflonBoy May 27 '23
Maybe we copy one of the other many successful countries that have actually managed to help their citizens through proper regulation. People ask on Reddit ‘hOw wOUld yOu ProPoSE..’ in bad faith.
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u/amegaproxy May 27 '23
Or rather it's a response to other redditors who go "It's simple just regulate it" or other completely empty statements which mean nothing. Which country would you copy and what rules?
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u/TeflonBoy May 27 '23
Tax or nationalise. Wealth tax on top. Slap in some pay ratio caps too. Nationalise a downstream too. Go even further and create a basic national energy tariff to customers. Make it progressively more expensive, so your penalised for using more but first bit is subsidised for the poor and the less fortunate and protects them from predatory energy companies. Regulate prices at the pump too.
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u/amegaproxy May 27 '23
Tax or nationalise.
We already tax them to the tune of 75%. There is absolutely no budgetary way we could nationalise Shell or BP.
Wealth tax on top
I assume we're moving away from just energy now? Not sure what this means.
Nationalise a downstream too
A supplier presumably? I don't see what the point really is here - they are just beholden buying energy at the same prices as the others. There is minimal profit to be saved by government activity in this sector.
Make it progressively more expensive
This is actually the only thing I agree with, the cap introduced should have been flexibly looser the more you used, so essentials were covered but if you're trying to heat a swimming pool it's far more punitive. This would have had better demand reduction instead of marketing it like personal bills were prevented from going over X amount.
Regulate prices at the pump too.
Another empty statement unfortunately.
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u/TeflonBoy May 27 '23
So you think we are taxing them enough if they announce 40 billion in profit?
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u/amegaproxy May 27 '23
You said "tax them" which we are doing, heavily. If you want to have a discussion on whether it's "enough" that's a separate conversation. We can start by determining how much of that 40billion you're quoting is actually made in the UK that we would have jurisdiction over, presumably you have the number to hand?
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u/vishbar Hampshire May 27 '23
They operate all over the world. They aren’t making £40 billion from their UK operations alone.
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u/Cynical_Classicist May 27 '23
It really is a disgrace how much price gouging energy companies are engaging in.
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May 27 '23
It's way more complicated than this, the suppliers we buy our energy from are barely making a profit, some are losing money and a few already went bankrupt and forced consumers to switch supplier.
Big actual producers i.e. Shell who pump the oil are raking it in but that isn't because they have devised some machiavellian scheme, they don't control the price at all. They just sell at the global rate and physically cannot force down market prices because they have already maxxed out their production at the behest of western governments.
It's the likes of Russia or Saudi Arabia that want the price of oil to rise, not western companies or governments.
Labour is just muddying the water and playing silly political games by saying "energy companies" so they can say they really meant e.g. Shell who has no power over the market in the first place.
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u/Gameplan492 May 27 '23
Classic Tory argument. "This isn't profiteering by the rich, you just don't get it. It's complicated"
It's not complicated at all. Record profits, record shareholder payouts, record bills. It's classic greed enabled by politicians who benefit from it.
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May 27 '23
Weirdly enough the geopolitics of energy, which underpin basically every industry in existence are in fact complicated.
If you can reduce a topic this vast to “no it’s easy just do x” you’re probably wrong or being mislead by someone else.
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u/TheMachineTookShape May 27 '23
For every problem there is a solution that is simple, neat—and wrong.
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u/toastyroasties7 May 27 '23
Classic Reddit argument. "I don't understand basic economics, but it's actually really simple"
It's not really simple at all. Companies haven't just woken up one day and decided to be "greedy", they've always been profit maximising, market conditions (lack of competition from Russia) have changed which is why profits increased. So it's not just "classic greed" it's just how markets work and have always worked.
Conversely, is wanting lower prices not just "consumer greed"? Both parties (consumers and producers) want to maximise their portion of surplus.
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u/rv_14 May 27 '23
Because “greed” from consumers barely getting by is as bad as greed from trillion pound companies…
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u/toastyroasties7 May 27 '23
Neither is "bad", it's just human behaviour.
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u/rv_14 May 27 '23
The companies’ greed is objectively worse though - they stand to turn billions into more billions, no one’s survival or choice to eat that evening depends on their greed.
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u/toastyroasties7 May 27 '23
You mean subjectively.
But at the end of the day, it's a pointless morality argument - you can't stop people acting in their own self-interest.
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u/cass1o May 27 '23
You mean subjectively.
In the sense all morals are subjective but we are measuring against generally accepted morals that normal people have.
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u/cass1o May 27 '23
Greed from companies is really bad. Unless you have zero morals that align with normal people.
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u/toastyroasties7 May 27 '23
Most people outside the Reddit communists don't have any issues with firms making profit.
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u/vishbar Hampshire May 27 '23
You don’t understand, the Reddit Bureau of Economics has spoken. Just make the price lower!
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u/cass1o May 27 '23
It's not really simple at all. Companies haven't just woken up one day and decided to be "greedy",
Obviously no. They are always greedy all of the time. It is just they can use this as a great opportunity to gouge.
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u/prototype9999 May 27 '23
We must not overlook the fact that while the cost of energy surges, these producers, who've managed to keep their production costs stable, are indeed reaping substantial profits. At the same time, energy suppliers, who operate closer to the consumers, are struggling with razor-thin margins, or worse, going out of business.
In such a scenario, it's not unreasonable to contemplate some form of intervention to level the playing field. For example, one solution could be a revenue tax on energy producers' profits from sales to the UK market, aimed at collecting any windfall resulting from global price hikes. Such funds could be used to subsidise energy bills for consumers and businesses, or to invest in renewable energy infrastructure, which could reduce our future reliance on volatile fossil fuels.
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May 27 '23
This wouldn't really work though, we are buying e.g. Oil at $100/barrel. The government could then slap a tax of 20% onto this as it enters the UK market but then you are just forcing up the cost to $120/barrel. The UK government cannot control the entire global energy market, even the US cannot do that.
The answer is to boost production to try force down prices, western companies like Shell and BP have done so, to the absolute max they can. However what we can't stop is i.e. Saudi Arabia's Aramco from then dropping production to try keep prices more favourable to them.
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May 27 '23
[deleted]
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May 27 '23
How about instead of insults and snark you write some substance against me?
If I’m so obviously wrong it should be easy?
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u/ICantBelieveItsNotEC May 27 '23
Cue the Corbynite raging against people who are making factual statements because the facts don't align with their socialist utopia.
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u/durand101 Free movement is a human right May 28 '23 edited May 28 '23
All they have to do is tax BP and Shell for their record profits. There's no need to overthink it. Their CEOs were practical begging to be taxed. The reason the Tory government doesn't want to do that is because it would be taking money away from UK pension funds, and their key constituents.
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May 28 '23
There is more to it than that though, BP and Shell took big hits in Covid and got essentially no support. Why should they now be taxed to hell and back because they've done well? That doesn't seem like a fair system to me.
Also a lot of the posts have focused on taxing their global profit, which is obviously not feasible.
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u/durand101 Free movement is a human right May 29 '23
They've done well by profiting off a war, not because of anything clever that they themselves have done.
Why is it not feasible? The UK government could easily work with the EU to take their profits. These companies are based in the UK so it is our right to tax them. If they leave, which is their right, they should lose access to the UK market. O&G companies should be wound down anyway, because they themselves have shown that they do not know how to transition away from fossil fuels.
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u/Tartan_Samurai May 27 '23
It's way more complicated than this, the suppliers we buy our energy from are barely making a profit, some are losing money
UK See's Energy Supplier Profits Increase to as much as £170 Billion
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u/amegaproxy May 27 '23
Why have you edited the headline of a paywalled article? It says generators and producers not suppliers in the line that's just visible in the opening, and the headline doesn't mention it either.
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u/thelazyfool May 27 '23
Wow way to completely miss the point he was making, and editorialise an article to fit the untrue point you made lol
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May 27 '23
You managed to get "price gouging" in there, but honestly, if you're really trying to come across as someone who doesn't understand even the basics of what you're talking about, may I suggest swapping 'companies' for 'corporations'?
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u/Vritran May 27 '23
Change how electricity prices work.
Producing cheap renewable electricity and forcing everyone to sell it at the same price as expensive electricity generated by gas is what is causing the massive profits.
The markup is huge.
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u/toastyroasties7 May 27 '23
Why would a renewable energy producer want to sell their electricity (that is identical to the non-renewable energy) for cheaper?
Making returns on renewable energy production lower only disincetivises investment in green energy too.
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u/Vritran May 27 '23
Except renewables already do sell cheaper to the wholesaler. They will have a rate agreed via contract
The wholesaler marks it up in line with Ofgem rules.
The renewable guys don't see any of the extra money.
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u/prototype9999 May 27 '23
Well, isn't this quite the spectacle? Energy companies reaping 'war profits' from the sky-high oil and gas prices, while average families scrape together pennies to keep the lights on. This windfall tax the government implemented is nothing more than a half-hearted band-aid attempting to staunch a haemorrhaging wound. It's as if they're trying to quench a forest fire with a watering can.
In all honesty, we need to face the cold, hard truth: laissez-faire capitalism is crumbling when it comes to essential utilities. And this cherry-picked windfall tax is akin to rearranging deck chairs on the Titanic.
Perhaps the Labour party should shift gears, stop dilly-dallying, and put forth a policy of price controls.
The elephant in the room is that the soaring energy prices are the primary culprit behind this rampant inflation and the potential collapse of our economy. We are in desperate need of radical measures, not some symbolic gestures of appeasement, hoping that this monumental crisis will magically resolve itself.
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u/BTC-maxi May 27 '23
In all honesty, we need to face the cold, hard truth: laissez-faire capitalism is crumbling when it comes to essential utilities.
We had a decade of cheap energy and near zero inflation, also during this"laissez-faire capitalism".
Then, a a huge chunk of supply was removed from the market, at the same time as demand shoot ups as countries come out of covid restrictions. A shortage exists.
The causes of the high prices aren't unique to capitalism. No amount of whatever economic utopia you have in your head can change the hard reality of a simple fact: prices rise during a shortage.
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u/John5247 May 27 '23
In that case as we are very deeply engaged in proxy World War 3 would the oil companies mind paying a bit more tax to pay for all the aid we are giving to Ukraine ? Perhaps it's time to have a national coalition war cabinet, with a minister for war. While we're at it we could have one for the climate crisis?
Can we just have a government that takes things seriously and collects some tax?
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u/ScrewEU May 27 '23
With heating and leccy bills having almost trebled.. all that money ends up in someone's pockets
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u/Wah-Wah43 May 27 '23
What is their policy again? A windfall tax and freezing bills at sky high levels. They like to moan, but they don't really have any solutions. Bunch of awful middle managers.
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u/Gameplan492 May 27 '23
I quite like politicians who moan on behalf of the people they serve rather than the ones who moan on behalf of themselves and their corporate sponsors.
And a windfall tax is a policy.
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u/Wah-Wah43 May 27 '23
Labour moan on behalf of their corporate sponsors. Look at who funds them. They are not on our side
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u/_rtfq May 27 '23
Might you enlighten us?
(Preferably with a source)
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u/Wah-Wah43 May 27 '23
https://www.ft.com/content/124e1566-e5dc-4e1e-8ca4-082bf272f6e6
https://www.mirror.co.uk/news/politics/labours-election-war-chest-boosted-29352960
There are plenty of sources and information online if you care to look.
The advisors to the leaders office have been openly bragging about taking this money from wealthy individuals and corporate donors these last 3 years and signalling they want to 'diversify the Labour funding model' which means, less reliance on trade unions and small donors, more money from wealthy individuals and corporate donors.
Do not be surprised when next to nothing changes if Labour win. They represent the same people the Tories represent now. Labour's NEC recently blocked a Green coalition in Hastings, and now there's a Labour-Reform coalition (Farage's ex party).
For energy, it's a windfall tax and freezing energy bills at sky-high levels. I.e. next to no changes and the status quo continuing.
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u/_rtfq May 27 '23
Thank you, just to be clear I wasn't questioning, just looking for more info.
I'm under no illusion that things will improve if Labour wins, and that's a seriously depressing place to be imo. I want to believe that whoever I'm voting for has policies to improve the country, quality of life etc. (A bit vague I know).
I can't be bothered for cheap blows (take Starmer going after Suella Braverman for the speeding offense) and think this is a damaging tactic for Labour.
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u/Wah-Wah43 May 27 '23
No worries, fair enough. Based on some comments I have seen on this sub about Labour, a lot of people are unfortunately unaware of what is coming, and they are in for a nasty surprise.
I expect meagre changes (most Tory fundamental changes of the last decade locked in, too) so that there is just enough to claim they have done something, but the status quo will remain. The Green Investment stuff sounds promising, but it's unclear if it's just another PFI, which was a disaster.
Reeves released a Green Paper yesterday championing 'modern supply side economics'. We already have supply side economics, rebadging it won't change a thing. NHS privatisation is set to continue.
As John Mcternan (former advisor to Blair) said last year. 'Thatcherites can come home to Labour again'
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u/uluvboobs May 27 '23
Who does she think kicks these things off, Shell and BP must be the biggest customers of the Foreign Office.
Halliburton -> Produce drilling equipment and "special services" -> Hire Dick Cheney as CEO -> Send him back to the White House to invade and sanction every oil producing country in the world.
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u/ohh3llo101 May 27 '23
She's not wrong but she'll do fuck and I mean fuck all about it. Maybe make a little noise, a few soundbites and then back to business as usual. Or if she makes a change it'll be slightly worse than before.
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May 27 '23
There's been some amount of shite spoken in this thread, but criticising the shadow government for not doing anything is fucking impressive work.
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May 27 '23
British gas made about £6 profit per domestic energy customer last year. It's not as simple as people are making out.
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u/Benandhispets May 27 '23
It doesn't seem to be talking about those companies to be fair. It specifies oil and gas extraction companies not the middle man suppliers like Octopus.
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u/Sad_Farmer_4997 May 27 '23
Never understood the UK's wider hatred of corporate profits, it's almost taboo. The deal is businesses make more money and pay more tax from a fixed tax rate which fills the coffers, but for some reason we just try and loot their profits when we run out of money to pay for a generous public sector in a country with terrible skills shortages and relying on immigrants to do all the real work. Things just get worse and we get more desperate to tax them more and push them further away.
On the energy front, if the price of something goes up and costs a certain amount to produce, you are going to see more profit. I think these people are ridiculously out of touch with the real world, gone are the days of Blair where we could pretend we were world police. If you want to solve the issue stop treating Russia how we are treating them, that's the only way to deal with this.
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u/Gameplan492 May 27 '23 edited May 27 '23
You never understood it because it's not a hatred of wider corporate profits, it's a hatred of unbridled greed enabled by the greedy at the expense of the desperate.
45% of all the money in the country is in the pockets of 5% of the people. And that's a number that gets worse every year. That's not a sustainable economic model, unless you believe that the majority of people should be slaves to an elite.
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u/Manovsteele May 27 '23
There are still big reforms that could have saved us a lot of money during this crisis. The major one is that why is the wholesale price of electricity still tagged to the fuel with the largest contribution (in reality always gas)? It meant that wind farms and nuclear power stations also made huge profits even though their operating costs barely changed.
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u/DavIantt May 27 '23
They long for the "halcyon days" of nationalised industries, but they were dirty, polluting and inefficient.
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u/Bokbreath May 27 '23
40yrs of neo-liberal deregulation and here we sit. Being told by the BoE to get used to a lower standard of living because nothing must be allowed to stand in the way of companies making as much profit as they can.