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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Something is missing from the Brexit debate

Inside Westminster, few seem to have noticed or care about the biggest question mark in the Brexit talks. 

What do we know about the government’s Brexit strategy that we didn’t before? Not much, to be honest.

Theresa May has now said explicitly what her red lines on European law and free movement of labour said implicitly: that Britain is leaving the single market. She hasn’t ruled out continuing payments from Britain to Brussels, but she has said that they won’t be “vast”. (Much of the detail of Britain’s final arrangement is going to depend on what exactly “vast” means.)  We know that security co-operation will, as expected, continue after Brexit.

What is new? It’s Theresa May’s threat to the EU27 that Britain will walk away from a bad deal and exit without one that dominates the British newspapers.

“It's May Way or the Highway” quips City AM“No deal is better than a bad deal” is the Telegraph’s splash, “Give us a deal… or we walk” is the Mirror’s. The Guardian opts for “May’s Brexit threat to Europe”,  and “May to EU: give us fair deal or you’ll be crushed” is the Times’ splash.

The Mail decides to turn the jingoism up to 11 with “Steel of the new Iron Lady” and a cartoon of Theresa May on the white cliffs of Dover stamping on an EU flag. No, really.  The FT goes for the more sedate approach: “May eases Brexit fears but warns UK will walk away from 'bad deal’” is their splash.

There’s a lot to unpack here. The government is coming under fire for David Davis’ remark that even if Parliament rejects the Brexit deal, we will leave anyway. But as far as the Article 50 process is concerned, that is how it works. You either take the deal that emerges from the Article 50 process or have a disorderly exit. There is no process within exiting the European Union for a do-over.  

The government’s threat to Brussels makes sense from a negotiating perspective. It helps the United Kingdom get a better deal if the EU is convinced that the government is willing to suffer damage if the deal isn’t to its liking. But the risk is that the damage is seen as so asymmetric – and while the direct risk for the EU27 is bad, the knock-on effects for the UK are worse – that the threat looks like a bad bluff. Although European leaders have welcomed the greater clarity, Michel Barnier, the lead negotiator, has reiterated that their order of priority is to settle the terms of divorce first, agree a transition and move to a wider deal after that, rather than the trade deal with a phased transition that May favours.

That the frontpage of the Irish edition of the Daily Mail says “May is wrong, any deal is better than no deal” should give you an idea of how far the “do what I want or I shoot myself” approach is going to take the UK with the EU27. Even a centre-right newspaper in Britain's closest ally isn't buying that Britain will really walk away from a bad deal. 

Speaking of the Irish papers, there’s a big element to yesterday’s speech that has eluded the British ones: May’s de facto abandonment of the customs union and what that means for the border between the North and the South. “May’s speech indicates Border customs controls likely to return” is the Irish Times’ splash, “Brexit open border plan “an illusion”” is the Irish Independent’s, while “Fears for jobs as ‘hard Brexit’ looms” is the Irish Examiner’s.

There is widespread agreement in Westminster, on both sides of the Irish border and in the European Union that no-one wants a return to the borders of the past. The appetite to find a solution is high on all sides. But as one diplomat reflected to me recently, just because everyone wants to find a solution, doesn’t mean there is one to be found. 

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