It’s not often that money just flies by. But since Vladimir Putin has been waging war against Ukraine, that’s exactly what’s happening: There are companies that have made billions in profits from the Russian attack, especially the energy companies. Companies benefit from something they are not responsible for. A debate has therefore begun in Great Britain and other European countries: Should the state skim off war profits with a tax?
There’s Shell, for example. The British energy group reported record profits of more than nine billion dollars for the first three months of the year – almost three times as much as in the previous year. CEO Ben van Beurden was apparently keen to point out that his industry was not solely benefiting from Putin’s attack on Ukraine. “It’s not just war profits, as some people like to claim,” he said when presenting the quarterly figures last week. Shell’s performance has fundamentally increased significantly during the corona pandemic.
Shell is not alone; other energy companies such as BP and Total have also posted billions in profits since Putin’s war of aggression. No wonder that politicians are now exploring how these could benefit the general public. After all, there are many people struggling to pay their oil and gas bills. In Greece, Italy and Spain, the governments have therefore announced a tax on so-called additional profits from energy companies. In Great Britain, too, the debate is in full swing. The tax revenues could cushion the rising energy costs for the population. This would help poorer people in particular.
People like Elsie from England. The pensioner is 77 and her heating bills have recently risen from £17 to £85 a month. That’s why Elsie only eats one warm meal a day. Otherwise, she takes the bus through London as often as possible to keep warm. At least it doesn’t cost Elsie anything, at her age she’s entitled to a free bus ticket.
In Great Britain, the pressure on Prime Minister Johnson to ask the corporations to pay is increasing
Elsie’s story is known across the UK because Boris Johnson was confronted with it in a TV interview. The British prime minister was shocked, but insisted on pointing out that he introduced the free ticket when he was mayor of London. Apart from the fact that this is not true, Johnson suddenly found himself as a politician without compassion, who wants nothing to do with the needs of poorer people. Anyway, Elsie was “disappointed” by the Prime Minister’s reaction.
For the country’s largest opposition party, however, Johnson’s appearance was a gift. Because Labor leader Keir Starmer was once again able to demand what he has been demanding for weeks: a tax on the profits that have flown to the energy companies because of Putin’s war. A so-called windfall tax happened from time to time in Britain, and not just when Labor was in power. In 1981, for example, the Conservative government under Margaret Thatcher introduced an additional tax for banks. From the point of view of the government at the time, the financial institutions had profited disproportionately from high interest rates. The following year, Thatcher had a special tax levied on oil and gas from the North Sea, which companies had to pay. The aim was to lower the high energy prices.
So although even Tory icon Margaret Thatcher resorted to this means, Boris Johnson has so far rejected one windfall tax away. The prime minister believes that such a tax would only result in corporations scaling back their promised investments in renewable energy. But many a company disputes the Prime Minister’s account. When BP boss Bernard Looney was recently asked which of the planned investments would not be made, the government should windfall tax introduce, he replied, “There aren’t any we wouldn’t do.” Johnson, on the other hand, was not impressed by this, so far he has stuck to his stance. And it says: “The companies don’t want this tax, and for a good reason: they would stop their investments in green technologies. And we need them.”
What remains is the hope that it will finally get warmer. But what about in autumn?
Now, Johnson is known for being quick to change his mind. So it cannot be ruled out that the energy companies in Great Britain will still have to pay a tax on war profits. In any case, the pressure on the government to do more to combat rising energy costs is increasing. There’s a good chance that’s coming soon, as the Tories suffered heavy losses in last week’s local elections. According to opinion polls, this was not only due to the lockdown parties in Downing Street, but also to the government’s hesitant reaction to energy prices.
Johnson never tires of pointing out that he has already done a lot. For example, the petrol tax was reduced by five pence per liter. And from July, the threshold above which citizens have to pay taxes and social security contributions will be raised. This should help low earners in particular. In order to increase energy efficiency, it should also be cheaper for homeowners to install solar systems or heat pumps. Anyone who buys these products should not have to pay VAT on them for the next five years.
But none of this changes the fact that oil and gas prices are likely to continue to rise. Keith Anderson, the head of Scottish Power, one of the largest electricity and gas suppliers in Great Britain, spoke up on Monday. He warned the government that heating costs would rise again significantly in the fall. “There is no other way to describe what people are facing than a crisis,” he said Financial Times. The citizens would have it “really very difficult”. Another boss of a large energy company recently said that in the fall 30 to 40 percent of all UK households could have trouble paying their bills. This requires “unprecedented action by the government”.
So far, however, Johnson has been hesitant. Perhaps the prime minister is hoping for the heat wave that has been forecast for the coming months in the UK. Some tabloids claim that it will sometimes even be warmer than in Italy.