The Labour Government

[bluenova]

Inspiring.

But he's more right than the interviewer, who is mixing up retail and wholesale, particularly with his supermarket analogy.

The 78% tax isn't on retail bills. It's on UK producers. They make up about 0.8% of the world gas market, so while reducing their taxes might make them more profitable, it's unlikely to have more than a tiny effect on the wholesale prices that our retail companies pay for their gas.

There are arguments about it disincentivising investment, and added transport costs for gas that's produced further away, but the 78% itself doesn't directly have much effect on our retail bills. I assume some people will come away from that thinking that there could be a huge reduction in our bills if we stopped it.

The supermarket analogy is plain wrong. It's not like taxing retail supermarkets. It's like taxing 0.8% of their suppliers for each product they sell. The other 99% we have no control over. That might marginally raise the price of each product, but by a tiny fraction of 1%.

 

[ganganvince]

It’s not factored in to the price cap mate. The real slight of hand is that our price cap is based on the most expensive source, even if only 10% of all our leccy comes from this most expensive source we are all paying as if 100% did. That can dramatically increase profits for these energy companies that the government now taxes at 78% with the recently introduced windfall tax, so now it’s really just a tax on us, the consumer.

On top of that the price cap also includes a bunch of government policy such as renewables which we pay for but don’t see the benefit in our bills. Broadly we’re getting our pants pulled down, Ed Miliband is squirming not because he doesn’t know how it works but rather knows full well how it works but doesn’t want us to.

I believe (could be wrong) it's included in the £198ish Gov policy section.

 

[bluenova]

It’s not factored in to the price cap mate. The real slight of hand is that our price cap is based on the most expensive source, even if only 10% of all our leccy comes from this most expensive source we are all paying as if 100% did. That can dramatically increase profits for these energy companies that the government now taxes at 78% with the recently introduced windfall tax, so now it’s really just a tax on us, the consumer.

On top of that the price cap also includes a bunch of government policy such as renewables which we pay for but don’t see the benefit in our bills. Broadly we’re getting our pants pulled down, Ed Miliband is squirming not because he doesn’t know how it works but rather knows full well how it works but doesn’t want us to.

I agree with most of the first paragraph, but not sure how it links to UK consumer's bills being increased significantly by that 78%. Given the companies being taxed make up such a small part of the world market, surely the wholesale price wouldn't drop by much if we taxed them at 0%?

The reason it's a windfall tax is because the prices they were getting for gas had risen so high - mostly because of prices across the world being pushed up due to the war in Ukraine. The UK government couldn't control that, and cutting the tax wouldn't give more money to consumers - the wholesale prices would remain high, so it would just give more money to the energy producers.

Given that the windfalls also go to the UK Government - and in turn the taxpayer - the tax is almost certainly a net gain.

I can see the argument about electricity prices being linked to gas making a difference. But isn't that a separate argument, that doesn't really involve the windfall tax?

 

[bluenova]

Milliband simply demonstrating that he is intellectually incapable of being Energy Secretary.

He could not get it into his head that the WHOLESALE prices are set internationally, not the RETAIL prices.

But the 78% tax is on the profits of the UK gas producers who are selling to the wholesale market. It only has a very marginal effect on the wholesale price, and therefore has almost no effect on the retail prices we pay.

 

[blueinsa]

I am out, think you are missing the point

He isn’t missing it, he is ignoring it and doubling down on what was an absolute car crash from the minister.

 

[threespires]

We need a smaller government, costing less and meddlling with people’s lives less. The state needs rolling back. And neither the Tories nor Labour are going to do it.

There’s still VAST amounts of waste going on. It’s so endemic, so ingrained, that those in the system don’t even see it anymore. We don’t need a police force spending 80% of their time in the station filling out forms. We don’t need people with draws full of free prescription drugs, unopened and unused and then the next free batch arrives. We don’t need productivity through the floor with half the public sector “working” from home. We need people to be free to get on with their jobs.

Etc etc etc etc.

Who else is going to give the UK the kick up the arse it needs?

Sounds like you're an ideologue Chippy? I'm more of a pragmatist, I don't care whether the state is big or small I care about it being efficient and successful in it's goals.That's not a function of size, it's a function of clarity of purpose, operational capability and good governance to name but three things within our control. It's not a function of public or private sector either as evidenced for example by comparing the overhead costs of the cripplingly inefficient US healthcare system to the, despite its many challenges, much more efficiently run NHS.

Your last point is interesting, does the UK need a kick up the arse? I believe we are at best moribund as a nation currently. Personally I think that a nation can exhibit a locus of control like an individual can and one of our issues as a nation is our locus of control is all over the place and has been for some time. This is understandable in that we went from an imperial power with a hugely internal locus to one where seemingly we had 'surrendered' to external loci of control personified by our membership of the EU. I think for those people who weren't into Brexit simply for the grift, it was a genuine but hamfisted attempt to return to more of an internal locus of control but it misunderstood the options available to us to fashion a locus that we could successfully get behind as a nation.

To me Reform have continuously illustrated that they don't actually understand what it means to 'take back control', they don't have a meaningful vision and there's nothing to suggest they could pursue good governance or display even basic operational competence. Frankly I'd have more confidence the members of BM could do a better job.

 

[bluenova]

He isn’t missing it, he is ignoring it and doubling down on what was an absolute car crash from the minister.

I'm not so sure. I think the interviewer has confused the issue, and is talking as if the 78% is a tax on retail energy companies, when it's a tax on the profits of the UK suppliers to the wholesale market (who make up a very small part of that market).

 

[Vic]

He isn’t missing it, he is ignoring it and doubling down on what was an absolute car crash from the minister.

For those who think I'm missing the point, it would be helpful if you said what you think the point is that I'm supposedly missing.

(Please include in any calculations how many billions the producers are getting in tax reliefs.)

 

[Chippy_boy]

Sounds like you're an ideologue Chippy? I'm more of a pragmatist, I don't care whether the state is big or small I care about it being efficient and successful in it's goals.That's not a function of size, it's a function of clarity of purpose, operational capability and good governance to name but three things within our control.

Amen to that!

I'm far from an ideologue. Actually I'm a devout pragmatist! And my 64 years of experience tells me that whilst the ideal scenario would be a state and public sector that exhibits all those fine attributes, the reality is that despite doubtless noble intentions, it's incapable of it. All it does is takes more and more money off us and pisses it down the pan. I'd love that it worked, but the reality is it doesn't. So I'd rather the useless and incompetent system was rather smaller and pissed less of our money away.

 

[Pingu the Penguin]

Amen to that!

I'm far from an ideologue. Actually I'm a devout pragmatist! And my 64 years of experience tells me that whilst the ideal scenario would be a state and public sector that exhibits all those fine attributes, the reality is that despite doubtless noble intentions, it's incapable of it. All it does is takes more and more money off us and pisses it down the pan. I'd love that it worked, but the reality is it doesn't. So I'd rather the useless and incompetent system was rather smaller and pissed less of our money away.

What public sector functions would you do away with?

 

[blueinsa]

Strong and stable? Further and faster?

Chancellor warned 'substantial tax rises' needed - as she faces 'impossible trilemma'

Rachel Reeves and Keir Starmer have repeatedly ruled out raising taxes on "working people", fuelling speculation about how the government could boost tax receipts in other ways - including a potential wealth tax.

news.sky.com

Tax and spend!

 

[hampshireblue]

We need a smaller government, costing less and meddlling with people’s lives less. The state needs rolling back. And neither the Tories nor Labour are going to do it.

There’s still VAST amounts of waste going on. It’s so endemic, so ingrained, that those in the system don’t even see it anymore. We don’t need a police force spending 80% of their time in the station filling out forms. We don’t need people with draws full of free prescription drugs, unopened and unused and then the next free batch arrives. We don’t need productivity through the floor with half the public sector “working” from home. We need people to be free to get on with their jobs.

Etc etc etc etc.

Who else is going to give the UK the kick up the arse it needs?

Big Joe, I really hope you're taking note of your mate Chippy. The one thing you think Labour did well in Wales. 50% more prescriptions per head compared to England. Nearly 3 prescriptions per month for every member of population.

 

[hcblue95]

Strong and stable? Further and faster?

Chancellor warned 'substantial tax rises' needed - as she faces 'impossible trilemma'

Rachel Reeves and Keir Starmer have repeatedly ruled out raising taxes on "working people", fuelling speculation about how the government could boost tax receipts in other ways - including a potential wealth tax.

news.sky.com

Tax and spend!

What would you suggest rather than tax and spend? Further austerity?

 

[metalblue]

I believe (could be wrong) it's included in the £198ish Gov policy section.View attachment 165060

I always assumed that was for renewables and the such mate. What’s amazing is all the random shit that we pay for!!!

 

[metalblue]

I agree with most of the first paragraph, but not sure how it links to UK consumer's bills being increased significantly by that 78%. Given the companies being taxed make up such a small part of the world market, surely the wholesale price wouldn't drop by much if we taxed them at 0%?

The reason it's a windfall tax is because the prices they were getting for gas had risen so high - mostly because of prices across the world being pushed up due to the war in Ukraine. The UK government couldn't control that, and cutting the tax wouldn't give more money to consumers - the wholesale prices would remain high, so it would just give more money to the energy producers.

Given that the windfalls also go to the UK Government - and in turn the taxpayer - the tax is almost certainly a net gain.

I can see the argument about electricity prices being linked to gas making a difference. But isn't that a separate argument, that doesn't really involve the windfall tax?

Perhaps I have misunderstood your post or I wasn’t clear in mind.

It (the tax) doesn’t go in to the price cap rate. What I was trying to say was if my leccy company pays in reality £1 a unit because it sources it exclusively from renewables but is able to charge me the highest per unit rate of £3 then it’s making £2 profit per unit, of that £2, £1.56 is heading back to the treasury in windfall tax and normal tax etc. I wasn’t linking the price cap to the tax, if the tax was 10% the price cap would be the same, I was merely highlighting that one of the biggest beneficiaries to the current setup is the treasury.

Obviously it’s more complex than my crude example posted above as they can offset profits and the unit rates simply made up for illustrative purposes.

 

[Chippy_boy]

Strong and stable? Further and faster?

Chancellor warned 'substantial tax rises' needed - as she faces 'impossible trilemma'

Rachel Reeves and Keir Starmer have repeatedly ruled out raising taxes on "working people", fuelling speculation about how the government could boost tax receipts in other ways - including a potential wealth tax.

news.sky.com

Tax and spend!

Perhaps she should be reminded...

"tax burden is its highest in 60, maybe even 70, years".

"There have been 24 tax rises in the 13 years of Conservative government," she added.

"I don't see a route towards having more money for public services that is through taxing our way there."

Rachel Reeves, 2023.

 

[Vic]

Amen to that!

I'm far from an ideologue. Actually I'm a devout pragmatist! And my 64 years of experience tells me that whilst the ideal scenario would be a state and public sector that exhibits all those fine attributes, the reality is that despite doubtless noble intentions, it's incapable of it. All it does is takes more and more money off us and pisses it down the pan. I'd love that it worked, but the reality is it doesn't. So I'd rather the useless and incompetent system was rather smaller and pissed less of our money away.

All those privately-run parks and libraries are brilliant.

Come back, turnpikes.

Do you want your electricity AC or DC?

Where does your water come from? In Manchester it's from reservoirs 90 miles away. You ideologues would be filtering it out of the Irwell.

 

[Brewster's millions]

What would you suggest rather than tax and spend? Further austerity?

Is it really austerity if public sector productivity is merely expected to return to the pre-Covid level, and the level of public sector expenditure is set accordingly?

Do you think it’s sustainable to continue to implement further tax rises, hobble the economy and increase debt servicing costs via higher inflation (in addition to the extra borrowing), just so the public sector can avoid returning to a level of productivity it managed five years ago?

 

[Chippy_boy]

Perhaps I have misunderstood your post or I wasn’t clear in mind.

It (the tax) doesn’t go in to the price cap rate. What I was trying to say was if my leccy company pays in reality £1 a unit because it sources it exclusively from renewables but is able to charge me the highest per unit rate of £3 then it’s making £2 profit per unit, of that £2, £1.56 is heading back to the treasury in windfall tax and normal tax etc. I wasn’t linking the price cap to the tax, if the tax was 10% the price cap would be the same, I was merely highlighting that one of the biggest beneficiaries to the current setup is the treasury.

Obviously it’s more complex than my crude example posted above as they can offset profits and the unit rates simply made up for illustrative purposes.

Investments are paid for out of retained profits. Tax 78% of the profit away and there's far less money for investments.

So two things happen, prices are pushed up because the business can't afford to invest in things that would drive efficiency improvements, and second, prices are pushed up to increase the amount retained profit so that some level of investment can still be maintained. Either way, prices are pushed up.

There's 2 possible reasons why Milliband said that taxes don't affect prices. 1. He's a buffoon. 2. He thinks we are idiots.

The reality is both are true.

 

[Chippy_boy]

Is it really austerity if public sector productivity is merely expected to return to the pre-Covid level, and the level of public sector expenditure is set accordingly?

Do you think it’s sustainable to continue to implement further tax rises, hobble the economy and increase debt servicing costs via higher inflation (in addition to the extra borrowing), just so the public sector can avoid returning to a level of productivity it managed five years ago?

Great post! How could ANYONE who's vaguely sensible, argue with that???