Labour’s energy profit cap would hurt Britain
ELIOT WILSON
If the title Baron Walker of Broxton leaves you blank, let me help: Richard Walker is executive chairman of the frozen food retailer Iceland, succeeding his father Sir Malcolm Walker, the company’s founder, in 2023. He was on the Conservative Party’s approved list of parliamentary candidates, then resigned in October 2023 because the party had ‘drifted badly out of touch with business and the economy’. Three months later he announced his support for Labour, and at the end of last year, Keir Starmer nominated him for a peerage.
Last month, the newly ennobled Lord Walker became the Government’s Cost of Living Champion. It is an ‘unpaid voluntary role’, and he will ‘consider how the whole of Government can go further to deliver on its priority of easing the cost of living for families’. Walker brings what he calls ‘real-world business experience and a sense of urgency’.
He is certainly thinking big. Last weekend, he wrote in the Sunday Times about the potential consequences of the conflict in the Middle East. He warned that energy companies should not raise their prices sharply and wrote in almost parodically bullish tones of the Government’s resolute stance.
‘We hauled the petrol retailers and energy producers into Downing Street last week to give them a shot across the bows – a warning that opportunistic rip-offs will not be tolerated. The Competition and Markets Authority was there too, with its newly enhanced power to step in if required… those sectors that have profited from price-gouging against the most vulnerable in society should consider themselves on notice.’
Walker added that he had asked ministers to consider a temporary profit cap on energy ‘to stop producers and retailers exploiting the crisis to make windfall profits at the expense of consumers’.
This is standard, we’re-on-your-side populist fare. Energy companies are sufficiently large and faceless to make easy yet satisfying targets, and there are few votes to be gained in standing up for British Gas, EDF or Total. Nevertheless, Walker was at pains to point out that his suggestion of a temporary cap on profits was very different from the ‘comprehensive, open-ended energy price cap’ which the leader of the Greens, Zack Polanski, had mooted. The economics of that policy, Walker argued, ‘don’t stack up – and could lead to disastrous consequences, such as rationing’.
It is one of those political irregular verbs: my price cap relieves the burden on hard-pressed consumers, your price cap leads to disastrous consequences, his price cap, presumably, is the first step towards a command economy.
By invoking the term ‘profiteering’, Walker has attempted to put a firewall around his argument. After all, no-one is in favour of profiteering. But it raises an issue which has frequently flummoxed and frustrated this Government, the gap between broad-brush, virtuous-sounding rhetoric and the hard yards of practical policy implementation.
Burnishing his business credentials, Walker emphasised that ‘I have no problem with profit. It’s what allows businesses to invest, employ people and pay tax. But I do have a big problem with profiteering, especially when families are under real pressure.’ But this humdrum position of approving of a good thing while opposing a bad thing has to have flesh put on its bones. If energy producers are at liberty to make a profit but must not ‘profiteer’, then, logically, there must be a quantum of profit beyond which it is impermissible to go.
What is that level, how is it calculated and by whom is it determined? It will have to be laid out explicitly, as the Government cannot impose financial penalties on the private sector on the basis of how something feels. ‘Profiteering’ cannot be reduced to knowing it when you see it.
This article (Labour’s energy profit cap would hurt Britain) was created and published by CapX and is republished here under “Fair Use” with attribution to the author Eliot Wilson
See Related Article Below
Petrol station bosses hit out at Labour’s ‘totally uneducated’ cost of living tsar
Iceland boss Lord Walker criticised for accusing retailers of ‘ripping off’ households amid global crisis
Petrol stations have hit out at Labour’s cost of living tsar after he claimed drivers were being ripped off at the pumps.
Forecourt bosses accused Lord Walker, who was appointed as Sir Keir Starmer’s cost of living tsar earlier this year, of launching a “totally uneducated” attack on the industry after he suggested they were using the war in Iran to profiteer at motorists’ expense.
Writing on LinkedIn, Lord Walker, the executive chairman of Iceland supermarket, said that petrol retailers that were using a “global crisis to rip off households need to be called out and penalised”. He had argued some businesses were “taking the p—”, following a series of increases in petrol and diesel prices at forecourts across Britain.
On Sunday, Lord Walker stepped up his criticism of “profiteers” and urged ministers to consider imposing a temporary cap on the profits of energy and petrol companies.
In a column for the Sunday Times, the Iceland chairman said this could “stop producers and retailers exploiting the crisis to make windfall profits at the expense of consumers”.
The price of diesel has now risen by more than 20p a litre in the UK to £1.66 since fighting began in the Middle East, according to the RAC. Petrol has climbed by almost 10p a litre to £1.45.
Lord Walker has claimed price rises were not “justified”. He said: “Supplies are good in the UK, so there’s no need to panic. If there’s a good supply, prices shouldn’t be rising. The consumer needs to be reassured, and petrol retailers need to be on notice that we won’t tolerate unnecessary behaviour.”
However, petrol station chiefs hit back at suggestions that these increases were driven by profiteering, instead claiming that they were at the mercy of oil prices. The price of a barrel of crude has jumped by more than 50pc since the conflict began.
Many smaller, independent forecourts have fuel supply deals where prices lag the oil market by just a day.
Darren Briggs, who runs 69 forecourts across the UK, said Lord Walker’s remarks were “extremely irresponsible”.
He said it was “very disappointing that Richard Walker and others appear to be totally uneducated” on how the market worked. Mr Briggs claimed that one of his sites made less than 2p of profit per litre of fuel sold.
Refuel & Go, another petrol forecourt operator, said Lord Walker’s comments were “naive”, claiming forecourts were making less profit than they usually would.
Gordon Balmer, executive director of the Petrol Retailers Association, said: “To make ill-informed comments about rip-offs and profiteering without actually understanding the market or even talking to any of the industry, particularly for somebody of his background and expertise, is hugely disappointing.”
Mr Balmer pointed to figures showing that the Government made “the most on a litre of fuel” rather than petrol forecourts, because of fuel duty and VAT.
Figures from RAC Fuel Watch show that petrol retailers’ margins on a litre of petrol are around 5pc. Fuel duty accounts for 36pc, while VAT is 17pc.
[…]
Lord Walker had argued that many politicians failed to acknowledge how difficult it is to run a company on tight margins.
The Telegraph: continue reading
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