Paying for the energy price guarantee has highlighted a deep political cleavage around tax ideology. Reframing windfall as emergency will be critical to leverage a change in direction.
Tax is always contentious. Debates surrounding who should pay, how much, and where the revenues are redistributed to are the heart of state power and national and global political economies. No one likes paying taxes but seeing tax only through the lens of either powerful interest groups or electoral politics misses the extent to which the contemporary tax debate in the UK, in particular in relation to so-called ‘windfall’ taxes on energy companies is driven by ideology. Ideas of tax – which ones should be levied, at what rate, to whom – are embedded in wider ideas of state and the role of government in socio-economic life. In the UK, political parties that call for higher taxes are associated with an interventionalist and redistributive state, while those who argue for low taxes believe in individual responsibility and markets. But the UK is currently facing an unprecedented economic crisis and the decision not to backdate taxes on the extraordinary profits energy companies have been making to pay for state intervention in energy markets in September 2022 has been based on ideology, underpinned by a set of ideals and ideas, when what is needed is a pragmatic response to an emergency. If opposition parties could move away from the language of ‘windfall’ that suggests the need to ‘punish’ companies for excess profits and speak instead of the need to come together to respond a national emergency, it might have helped them cut through the government’s ideology approach. To do so, there are lessons that can be learned from elsewhere, in this case Latin America.Read More »