Thursday 4 September 2008

Gordon Brown Speech: Tilting at Windfalls


"Fortune is guiding our affairs better than we ourselves could have wished. Do you see over yonder, friend Sancho, thirty or forty hulking giants? I intend to do battle with them and slay them. With their spoils we shall begin to be rich for this is a righteous war and the removal of so foul a brood from off the face of the earth is a service God will bless."

So said Gordon 'Quixote' Brown just last week. Tax the energy companies for windfall monies to distribute to client voters. Win the approval of the Labour backbenches; slay the media and Conservative enemies.

But tonight in his speech to the Scottish CBI Gordon did no such thing. Whilst saying that all will be fine, he also declared there will be a strong economy under his watch.

What he did not say is that he has no energy policy, he can't tax windfall profits that don't really exist as he has already taxed the oil companies to the point at which they stopped exploring the North sea for more oil. per chance next week then a real policy, to announce new nuclear and coal builds? Somehow I feel we will be disappointed.

Whilst I am happy that only small measures are to be made, all his previous sweeping policies have been disastrous, it shows the lack of ability of the Government to control or respond to events.

We are up the creek, we have no paddle and there are still forty giants over there....

16 comments:

Unsworth said...

The Economy (our Economy) is Brown's Rocinante.

A clapped out old nag.

Anonymous said...

What about the windfall obtained by those who sold their houses btween 1997 and quite recently; why doesn't Gordon and the Moronanauts advocate taxing their windfall?

patently said...

Err ... he did. It's called 4% Stamp Duty.

Bill Quango MP said...

Patently:
Beat me to it!

rwendland said...

A while ago I analysed British Gas Residential's operating margins (profit/revenue) since 2001 - extracting the division's numbers for Centrica's accounts. There did seem to be a large blip in profitability when gas price volatility hit in 2007:

Year Operating-margin
2001 0.4%
2002 4.2%
2003 2.6%
2004 4.1%
2005 1.5%
2006 1.3% (2001-2006 average = 2.35%)
2007 8.8%
2008H1 4.3%

British Gas Residential division of Centrica does not include the gas production divisions, just residential distribution and customer handling - a simple utility which even rents the distribution pipes, with little capital deployed or high risk. You have to admit the 2007 8.8% operating margin was very high for such a basic utility.

I don't know if British Gas competitors also took higher profits during the period of price turbulence. But there might well be a case here that they all took advantage - so should have a windfall tax applied.

British Gas Residential's 2007 operating profits (£571 million) represents £35.60 profit per customer (gas and/or electricity - £407 average annual bill). You could argue they made £25 excess profit per customer - not huge but not insignificant. British Gas Residential seems to have retained smaller than average customers, probably a lot of the least well off.

CityUnslicker said...

very interesting stuff there rwendland

Anonymous said...

"Err ... he did. It's called 4% Stamp Duty."

4 %? Why not 96 %? He should apply it now and make it retrospective to April 1997.

patently said...

>> 4 %? Why not 96 %?

Hey, why not? Who needs a housing market after all? :o)

And while we're at it, we don't really need an economy either, so why not raise income tax to 96% too?

Tell you what - the day that Labour MPs voluntarily pay a 96% tax rate on their MPs earnings, I'll agree to it becoming law. And then emigrate.

Nick Drew said...

Mr W - good analysis, but I am sorry to tell you it is undermined by Centrica's considerable ability to switch reported profits between divisions, more or less at will.

In recent years there have, for example, been some apparently humungous losses in their industrial division which, given the universal pricing approach in industrial gas & electricity sales (= perfect pass-through of wholesale costs, very transparent to all concerned) cannot be taken at face value, and almost certainly reflect what might equally be considered wholesale / trading losses

the taxman doesn't care about how profits are apportioned (outside of the North Sea production arena where a different tax regime applies), and since prices are no longer regulated, neither does Ofgem

so there's a lot of 'discretion' being exercised in the reporting

Anonymous said...

"he can't tax windfall profits that don't really exist as he has already taxed the oil companies to the point at which they stopped exploring the North sea for more oil."

Can somone clarify what tax rates apply to the oil companies. Is it really so high they are no longer exploring for more oil? If so whats thw evidence to say this?

rwendland said...

ND: If Centrica engage in transfer pricing they have only themselves to blame if they get windfall taxed because of it! Centrica have had these division numbers in their annual report for years, and they shouldn't be deceiving their shareholders on division profitability. Anyway I thought executive and others bonuses were often driven by division profits, so there would be an internal motivation to be truthful on these numbers.

Also Local Government Association research into this shows the "big six" energy suppliers increased dividends by 19% in 2007, suggesting this Residential sector increase in profits isn't simply a transfer from other divisions. (Strangely The Telegraph version of this LGA story seems to have been deleted from their website!)

Anon: The marginal gas extraction extraction tax is 70% or 75% I believe. HMRC info suggests 70% ("Current marginal rates of tax are ... PRT, CT and SC - 70%")
but I've seen 75% mentioned in the press.

CityUnslicker said...

Thanks RWE for the oil tax stuff.

re the 19% what people are missing is that this is £250 million. Not a sum that is really going to get the Government excited. When they tax for £1 billion then the companies will go mental, as will their share prices...

rwendland said...

Anon: Seems I got the gas extraction tax a bit wrong for gas fields developed since 1993.

Marginal tax rate on new UK gas/oil fields (since 1993) is 50% while the marginal tax rate on fields paying PRT (pre-1993) is 75%, according to this 2006 DTI info.

Don't know which administration introduced this split taxation rate - it seems to go way back.

Nick Drew said...

Mr W - the dividend point is fair, the bonus point is not (they'll pay bonus on any basis they please - no need for it to be aligned with published accounts ...)

the various offshore tax regimes are too complex to summarise, both in detail and in origins; govts of all colours have tinkered with them endlessly

of interest:

- there was a determined effort by the Tories to make PRT a return-on-capital tax - but it became so complex it disappeared up its own fundament

- Geoffrey Howe introduced the first energy windfall tax - Special Petroleum Duty, or SPD, in 1980 (from memory), in response to the huge oil price increases of 1979

- at around the same time, and for entirely separate reasons, the Tories forced what was then the British Gas Corp to increase its residential gas prices (which were too low to encourage the next generation of North Sea gas production: not a single exploration well was drilled in the gas areas in 1978/9/80); but then introduced another windfall tax - on BGC - called the Gas Levy; because on their long-running purchases from already-producing fields, they were still going to be getting the benefit of ridiculously low prices struck in the 1960's

Anonymous said...

aaaa片, 免費聊天, 咆哮小老鼠影片分享區, 金瓶梅影片, av女優王國, 78論壇, 女同聊天室, 熟女貼圖, 1069壞朋友論壇gay, 淫蕩少女總部, 日本情色派, 平水相逢, 黑澀會美眉無名, 網路小說免費看, 999東洋成人, 免費視訊聊天, 情色電影分享區, 9k躺伯虎聊天室, 傑克論壇, 日本女星杉本彩寫真, 自拍電影免費下載, a片論壇, 情色短片試看, 素人自拍寫真, 免費成人影音, 彩虹自拍, 小魔女貼影片, 自拍裸體寫真, 禿頭俱樂部, 環球av影音城, 學生色情聊天室, 視訊美女, 辣妹情色圖, 性感卡通美女圖片, 影音, 情色照片 做愛, hilive tv , 忘年之交聊天室, 制服美女, 性感辣妹, ut 女同聊天室, 淫蕩自拍, 處女貼圖貼片區, 聊天ukiss tw, 亞亞成人館, 777成人, 秋瓷炫裸體寫真, 淫蕩天使貼圖, 十八禁成人影音, 禁地論壇, 洪爺淫蕩自拍, 秘書自拍圖片,

做愛的漫畫圖片, 情色電影分享區, 做愛ㄉ影片, 丁字褲美女寫真, 色美眉, 自拍俱樂部首頁, 日本偷自拍圖片, 色情做愛影片, 情色貼圖區, 八國聯軍情色網, 免費線上a片, 淫蕩女孩自拍, 美國a片, 都都成人站, 色情自拍, 本土自拍照片, 熊貓貼圖區, 色情影片, 5278影片網, 脫星寫真圖片, 粉喵聊天室, 金瓶梅18, sex888影片分享區, 1007視訊, 雙贏論壇, 爆爆爽a片免費看, 天堂私服論壇, 情色電影下載, 成人短片, 麗的線上情色小遊戲, 情色動畫免費下載, 日本女優, 小說論壇, 777成人區, showlive影音聊天網, 聊天室尋夢園, 義大利女星寫真集, 韓國a片, 熟女人妻援交, 0204成人, 性感內衣模特兒, 影片, 情色卡通, 85cc免費影城85cc, 本土自拍照片, 成人漫畫區, 18禁, 情人節阿性,

Anonymous said...

情色電影, aio交友愛情館, 言情小說, 愛情小說, 色情A片, 情色論壇, 色情影片, 視訊聊天室, 免費視訊聊天, 免費視訊, 視訊美女, 視訊交友, ut聊天室, 視訊聊天, 免費視訊聊天室, a片下載, av片, A漫, av dvd, av成人網, 聊天室, 成人論壇, 本土自拍, 自拍, A片, 愛情公寓, 情色, 舊情人, 情色貼圖, 情色文學, 情色交友, 色情聊天室, 色情小說, 一葉情貼圖片區, 情色小說, 色情, 色情遊戲, 情色視訊, 情色電影, aio交友愛情館, 色情a片, 一夜情, 辣妹視訊, 視訊聊天室, 免費視訊聊天, 免費視訊, 視訊, 視訊美女, 美女視訊, 視訊交友, 視訊聊天, 免費視訊聊天室, 情人視訊網, 影音視訊聊天室, 視訊交友90739, 成人影片, 成人交友,

免費A片, 本土自拍, AV女優, 美女視訊, 情色交友, 免費AV, 色情網站, 辣妹視訊, 美女交友, 色情影片, 成人影片, 成人網站, A片,H漫, 18成人, 成人圖片, 成人漫畫, 情色網, 日本A片, 免費A片下載, 性愛, 成人交友, 嘟嘟成人網, 成人電影, 成人, 成人貼圖, 成人小說, 成人文章, 成人圖片區, 免費成人影片, 成人遊戲, 微風成人, 愛情公寓, 情色, 情色貼圖, 情色文學, 做愛, 色情聊天室, 色情小說, 一葉情貼圖片區, 情色小說, 色情, 寄情築園小遊戲, 色情遊戲, 情色視訊,