A one-off windfall tax on energy companies won't address the underlying problem. It is the EU's green agenda that is causing the real problem just as the ERM was at the core of an earlier problem

by John Redwood MP

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The suggestion that the government should  impose a windfall tax on energy companies may be attractive to some at a time when energy companies are far from popular. It would be revenge for their price hikes, when many are feeling the pinch as a result.

Sir John Major is right to say that Conservatives need to show concern for people on low incomes and benefit incomes who feel the squeeze from high energy prices more keenly than those on higher incomes.

However, a one off tax rise to provide some additional one off help to people on tight budgets does not go to the heart of the problem. The following year after the windfall tax energy prices might be just as high or higher. The underlying problem, dear energy,  has to be addressed.

Nor does it make any sense to say to Conservatives we need to concentrate on bread and butter issues like jobs, incomes and prices, and turn aside from consideration of our relationship with the EU. It is the relationship with the EU that is causing the disruption of family budgets.

In this case of energy we need  the EU to suspend or repeal its renwables requirement. Demanding that we generate a rising proportion of our electricity from renewables is forcing the cost of energy up.

The EU needs to suspend or amend its Large Plants Directive. Then we could run our older power stations for longer, saving us a lot of cost, keeping energy prices lower, and delaying the need to spend large sums on replacing them with something dearer.

In Sir John’s day, arguments over Europe were not some abstruse diversion from the politics of jobs, incomes and daily life. They were then about how high interest rates had to go and how high they had to stay.

The ERM he took us into did  economic damage, destroying jobs and businesses,  and squeezing family budgets. That is why the Conservatives lost in 1997. It was only when the party apologised for ther ERM mistake that it could move on, and it was only when Labour made a worse mistake with its Big boom and bust that Conservatives had a chance of winning again.

The Conservative poll rating fell dramatically on the collapse of the ERM policy. It did not fall during the long arguments over Maastricht. On the doorsteps in 1997 voters were not angry that some Conservatives opposed the single currency. They were complaining about the economic damage the ERM had done to them and their families.

The Rt Hon John Redwood MP is the Member of UK Parliament for Wokingham and the Chairman of the Conservative Economic Affairs Committee. His articles are cross-posted on his blog by agreement

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