Windfall blackmail

It has become a familiar spectacle. No 10 floats an expensive new policy. The Treasury says it will have to be paid for. This time, Boris Johnson is said to want tax cuts soon to help counteract the cost of living squeeze. That would be a sensible move and consistent with Conservative principles.

The Chancellor, however, has been talking about a substantial tax increase. He is threatening energy firms with a windfall tax, a Labour policy that would penalise companies that have made large profits from the rise in oil and gas prices. Rishi Sunak says that the idea might prove “pragmatic” if the firms do not increase investment in new production. Now Boris Johnson has said the Government will have to look at it.

This is not a Conservative approach. It is blackmail. Companies should not have to fear that profits they make perfectly legally may be confiscated arbitrarily by the state. Down that route lies a collapse in investment, and the further erosion of the UK’S reputation as a stable place to do business. It would also confirm many people’s suspicion that the Government is out of ideas and unwilling to do the hard work that would deliver lower prices over the long term.

There are reasons why energy investment is not soaring alongside higher prices. The market is tied up in red tape, and politicians remain committed to hubristic net zero targets that foresee the phasing out of fossil fuels. What certainty do energy firms have that investments they make now will not be penalised in a few years’ time, once the immediate crisis passes? Tories used to understand all of this. Now they are mired in ideological confusion. It seems the party will have to learn the lesson all over again that socialist economics does not work.