16 May 2022
Politicians are calling for a windfall tax on energy companies. The idea being to use the funds to help ease the pain of the cost of living crisis.
And Somerset has a lot of people feeling that pain right now. But is a windfall tax on energy companies the best way to fix the problem? Are there smarter ways of helping people in need?
Then we focus on one of Somerset’s premier arts competitions and, drumroll please, last but never least, the arbiter of all words of wisdom, Herbert the cat.
Take the money and run
There is no doubt that the cost of living crisis is biting and biting hard. It is hurting people in our own communities here in Somerset. There are just under 36,000 people on Universal Credit in the four districts in the Somerset County Council area. And another 17,000 on the old legacy benefits.
That is just about 53,000 or 9% of the population of the Somerset Council area.
On 17 March, the Bank of England's Monetary Policy Committee said that inflation would rise to around 8% in 2022 Q2. With prices already rising steadily the fact that the 2022 budget contained no rises in basic benefits was, to say the least, unhelpful. If you like it built in an 8% cut in the spending power of those on benefits.
The crisis was exacerbated when on 1 April, OFGEM increased the price cap for energy bills. The new cap will see a household with average energy consumption on a ‘dual fuel’ gas and electricity standard variable rate tariff (SVT), paying by direct debit; paying £1,970 a year. That’s up from the previous cap of £1,277.
Using the budget to take back the £20 extra that claimants had received during COVID 19, appeared crassly out of touch. Summer is on the way (at last) but once we get to autumn and families need to heat their homes, the impact on the rises in energy bills will only add to the pain.
All of which is why many politicians, increasingly across the political spectrum, are calling for a windfall tax on energy companies. The idea, apparently, being to use the funds to help mitigate the cost of living crisis.
The Big Issue reported last month that Shell’s 2021 annual report showed that it paid no tax on its oil and gas production in the North Sea for the fourth year in a row despite soaring global energy prices and record company profits. The oil giant instead received $121m (£92m) in tax refunds paid by the UK Treasury for the decommissioning of old oil platforms. So there is clearly plenty of money there to be taken in a windfall tax.
“Shell’s 2021 annual report showed that it paid no tax on its oil and gas production in the North Sea for the fourth year in a row”
But that is not the whole [picture.
Think for a moment of Shell’s great rival, BP. BP was until 1979, a state owned company. All the profits of BP were available to the state as a matter of course until the years between 1979 and 1987 when it was privatised. That changed everything. The ideology was that Britain would benefit from the tax revenue that BP would pay. Just like the other big oil companies prospecting in British waters for oil and gas. Inevitably, these sums were little and often. They went towards balancing the national books year in year out.
“you can do a lot to help benefits claimants if you have a spare $13bn every year.“
It didn’t work like that in Norway though. Norway did not privatise its state oil business (Statoil). And further, it took the profits from oil exploration in the Norwegian sector of the North Sea and created a sovereign wealth fund. In other words a giant investment fund owned by all the people of Norway. Today the value of that fund is estimated at $1.3 trillion. The interest on that balance alone, at just 1% per annum, would generate $13bn. Now you can do a lot to help benefits claimants if you have a spare $13bn every year. Unfortunately Britain did not do this, so we don’t have a spare £13bn.
The message from Norway is simple. Taking a long term strategic view pays off. So how do we learn from that lesson? A windfall tax on energy companies sounds like an attractive proposition. The money would be valuable to the economy and to planning for the future.
But not for a short term crisis, such as the current cost of living crisis. If we are to take a windfall tax on energy companies, it makes much more sense to invest for the long term. How? Well a good start would be to reduce our reliance on imported energy.
The Ukraine crisis has brutally illustrated two things.
Firstly how inept and slow our transition away from fossil fuels has been.
And secondly that we are still dependent on foreign powers to heat our homes and drive our cars.
The two are of course connected. If we had actually delivered on ramping up home produced energy, we would not now be tossing a coin to decide which unpleasant, despotic regime we would like to buy our oil and gas from.
Right mechanism, wrong answer
Money from a windfall tax should be used for long term investment. For instance to accelerate a program of green energy. Not providing a short term solution to help those in need today. That could include insisting that all new build housing should be carbon neutral and as a matter of course include solar panels and similar energy saving innovations. Further substantial investment in offshore wind, investment in tidal schemes and battery storage could follow. In short working to rapidly reduce the timeframe in which Britain moves to self sufficiency in green energy.
Too often in the past the British Government has taken windfalls, such as the money from privatising companies, and used it to balance the nation’s books for a single year. There has been a lack of long term thinking. A lack of strategic investment. There is arguably a need to draw a line under what has been a strategic mistake. Or more precisely of making the mistake of not having a strategy. Windfalls should be seen as investment opportunities, not just a sticking plaster over short term budget deficits.
Long term, an investment in “home grown” energy, clean energy will help the most needy in society. It will offer cheaper energy and remove some of our exposure to the wild fluctuations in the prices for energy on world markets.
But what about those in need today? Cheap energy in five to ten years time will not help. But as long as we have governments that are looking for short term fixes, Britain will not find solutions that require long term thinking. The short term cost of living crisis needs addressing. It needs addressing now and out of current spending plans. It does not need addressing from a windfall tax.
Help those in need
So let us return to those 53,000 in Somerset on some kind of benefit. To give every person on benefits in Somerset the £20 taken off them at the last budget, would cost £54m give or take. It does sound like a lot of money.
But how much do our various councils, district and county, spend on the people of Somerset already? If you look at the gross spending of the four district councils and Somerset County Council for the financial year 2020/21, it totalled £1.2bn. Against that level of spending, helping local people out with £20 a week doesn’t seem such a big ask.
It would be just 4.5% of the total that Somerset councils already spend.
We now have a unitary authority in Somerset. Is it brave enough to take this on from within its own budget? It is always easy to ask for hand outs from central government. But what to do when that government is unwilling to help or simply fails to understand the depth of the problem? We have a newly elected group of councillors, it is up to them to take the lead on this issue. That means not just asking other layers of government to fix the problem, but coming up with local solutions too. Creative ways of helping the people who need help the most. Arguably, for a centre/left party, it should be their number one priority.
No doubt they will, indeed they should, lobby for funding from central government too. The easiest solution of all would be for the government in Westminster to simply divvy up the cash.
Nor are we saying £20 a week is all there is to do to end the cost of living crisis. It clearly isn’t. But surely it would be a pretty good start.
Black Swan Arts Competition
Every year (give or take a pandemic) the Black Swan Arts Centre in Frome plays host to an arts competition. Open to all comers (amateur and professional) and artists working in most media (including digital) one hundred pieces will be selected from among the entrants to form the bedrock of a summer arts exhibition. It is one of the most prestigious competitions in Somerset and it doesn’t get the publicity it deserves. Hence this small gesture in the direction of putting that right!
Selection of the artworks for the exhibition and ultimately the prize winners too, will be by a panel of judges. The calibre of the exhibition is perhaps best seen through the calibre of the judges. These include Gary Topp, Executive Director at the Arnolfini in Bristol, Debbie Hillyerd Global Director of Education, Hauser and Wirth and Will Cooper Curator of Contemporary Programmes and Special Projects at The Holburne Museum, Bath. As well as selecting the artworks for the exhibition, the judges will of course award the prizes. These run from £200 to £1,000.
So if you are in the world of the arts and you are tempted, follow the link to the competition rules and take it from there. The link is here Please note the deadline for entries is 2 June.
If you want to visit the exhibition, it runs from 15 July to the 11 September. Pop those dates into your diary. In the words of Amanda Sheridan, Curator at the Black Swan, “Every available wall at Black Swan Arts will display work chosen for the exhibition: the shop, the café, the Round Tower Gallery and the Long Gallery and even the corridors. Every piece will be for sale and priced up to a maximum of £1000, and with lecture lunches and discussion dinners, buyer’s drinks and opportunities to meet artists, everyone should have a chance to find a work to take home.”
If you’ve not been before, the Black Swan Gallery is at 2 Bridge Street, Frome, Somerset BA11 1BB next to the town centre car park.
Herbert knows that it is important to drink water. Lots of it. Given that his dinner of choice is dried cat crunchies of various brands, this is undoubtedly wise. The mystery to us at Leveller® Towers, is that Herbert will rarely drink from the bowl of clean water left for him. Running water from the hot water tap (ouch), soapy water from the washing up bowl, water from dirty puddles, sometimes not much better than mud, and best of all licked off the skin of an unsuspecting member of the Leveller® Towers team who thought (wrongly) that all they needed was to dry their hands.
When challenged on this curious habit with water Herbert responded with some questions of his own…
“Do you get colds?”
“Hmm, I don’t… maybe its the water?”
“Do you get illnesses related to the things you drink?”
“Well, leaving aside alcohol…”
“It seems to me you humans rarely leave aside alcohol”
“Well the occasional upset stomach… the milk goes off sometimes”
“I know, you can smell it a mile off, except you can’t and you drink it….. And you think I am the one who should watch what I’m drinking?”
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