Major's call for an energy windfall tax offers the Tories an escape route

By rejecting Miliband's proposed price freeze and calling for an "emergency excess profits tax" on the energy companies, the former PM has pointed the way forward for the Tories.

As a former prime minister, John Major always speaks with care, which makes his intervention in the energy debate all the more striking. At a press gallery lunch this afternoon, he attacked the energy companies for price rises that were "not acceptable" and called for the government to impose an "emergency excess profits tax" on them (citing the cost of increased Winter Fuel Payments). He said:

"Sod’s Law is that we will probably have a very cold winter and it is not acceptable to me, and it ought not be acceptable to anyone, that many people are going to have choose between keeping warm and eating. That is not acceptable.

"And so if we get this cold spell, the government will have to intervene and if they do intervene and it is costly, I for one would regard it as perfectly acceptable for them subsequently to levy an excess profits tax on the energy companies and claw that money back to the Exchequer where their primary job is to get the economy working and back to work."

While he dismissed Ed Miliband's proposed energy price freeze ("a good heart but his head has gone walkabout"), his words help legitimate the Labour leader's crusade against the "big six" and encourage the impression that the government is standing idly by. In an echo of Miliband's recent rhetoric, Major warned that many people would have to choose between "keeping warm and eating" this winter. 

The question now is how the Tories will respond. Ahead of the Autumn Statement on 4 December, George Osborne was surely already considering a windfall tax as a riposte to Labour's price freeze (several Tories have mentioned the idea to me), but Major's intervention removes the element of surprise that the Chancellor craves (although it's worth asking whether this is a calculated act of kite-flying).

Despite this, Osborne could still do far worse than simply embrace the former PM's proposal. A windfall tax would be viewed as less interventionist than a price freeze (helpfully rejected by Major) and could be justified pragmatically on fiscal grounds. Labour, which imposed its own windfall tax in 1997 (ironically attacked by Major at the time), would argue that a price freeze is superior, but would struggle to oppose an emergency levy. On this occasion, Osborne should follow Oscar Wilde's advice and remember that "talent borrows, genius steals".

Update: No. 10 has issued the following statement on Major's comments: "This is a very interesting contribution to the debate. But we have no plans for a windfall tax." 

In response, it's worth noting that the Tories similarly claimed that they had "no plans" to raise VAT before the last general election (before doing just that). Downing Street could have rejected the idea of a windfall tax entirely. Instead, it has kept it in play. 

John Major warned that many people would have to choose between "heating and eating". Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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Forget planning for no deal. The government isn't really planning for Brexit at all

The British government is simply not in a position to handle life after the EU.

No deal is better than a bad deal? That phrase has essentially vanished from Theresa May’s lips since the loss of her parliamentary majority in June, but it lives on in the minds of her boosters in the commentariat and the most committed parts of the Brexit press. In fact, they have a new meme: criticising the civil service and ministers who backed a Remain vote for “not preparing” for a no deal Brexit.

Leaving without a deal would mean, among other things, dropping out of the Open Skies agreement which allows British aeroplanes to fly to the United States and European Union. It would lead very quickly to food shortages and also mean that radioactive isotopes, used among other things for cancer treatment, wouldn’t be able to cross into the UK anymore. “Planning for no deal” actually means “making a deal”.  (Where the Brexit elite may have a point is that the consequences of no deal are sufficiently disruptive on both sides that the British government shouldn’t  worry too much about the two-year time frame set out in Article 50, as both sides have too big an incentive to always agree to extra time. I don’t think this is likely for political reasons but there is a good economic case for it.)

For the most part, you can’t really plan for no deal. There are however some things the government could prepare for. They could, for instance, start hiring additional staff for customs checks and investing in a bigger IT system to be able to handle the increased volume of work that would need to take place at the British border. It would need to begin issuing compulsory purchases to build new customs posts at ports, particularly along the 300-mile stretch of the Irish border – where Northern Ireland, outside the European Union, would immediately have a hard border with the Republic of Ireland, which would remain inside the bloc. But as Newsnight’s Christopher Cook details, the government is doing none of these things.

Now, in a way, you might say that this is a good decision on the government’s part. Frankly, these measures would only be about as useful as doing your seatbelt up before driving off the Grand Canyon. Buying up land and properties along the Irish border has the potential to cause political headaches that neither the British nor Irish governments need. However, as Cook notes, much of the government’s negotiating strategy seems to be based around convincing the EU27 that the United Kingdom might actually walk away without a deal, so not making even these inadequate plans makes a mockery of their own strategy. 

But the frothing about preparing for “no deal” ignores a far bigger problem: the government isn’t really preparing for any deal, and certainly not the one envisaged in May’s Lancaster House speech, where she set out the terms of Britain’s Brexit negotiations, or in her letter to the EU27 triggering Article 50. Just to reiterate: the government’s proposal is that the United Kingdom will leave both the single market and the customs union. Its regulations will no longer be set or enforced by the European Court of Justice or related bodies.

That means that, when Britain leaves the EU, it will need, at a minimum: to beef up the number of staff, the quality of its computer systems and the amount of physical space given over to customs checks and other assorted border work. It will need to hire its own food and standards inspectors to travel the globe checking the quality of products exported to the United Kingdom. It will need to increase the size of its own regulatory bodies.

The Foreign Office is doing some good and important work on preparing Britain’s re-entry into the World Trade Organisation as a nation with its own set of tariffs. But across the government, the level of preparation is simply not where it should be.

And all that’s assuming that May gets exactly what she wants. It’s not that the government isn’t preparing for no deal, or isn’t preparing for a bad deal. It can’t even be said to be preparing for what it believes is a great deal. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.