Assisting Households Facing Rising Energy Costs

Question 1: Overall, which of the following best characterises how the government’s proposed energy policies will leave the average UK household over the medium term:

Question 2: Which of the following is the best way to address the impact of rising energy costs on household finances?

Question 3: Should a windfall tax be used to (fully or partially) finance support to households?

Summary

The September 2022 CfM survey asked the members of its UK panel whether the government’s proposed energy cost support policies will leave the average UK household better off. The panel is roughly evenly split on this question, but a large majority (over 90%) suggests that other policies are more effective. A majority of 65% believes that conditional or targeted transfers would be a more effective way to support households through the winter and an additional 23% would have liked to see the price caps to increase with energy use. A majority of 72% would like to see the household support fully or partially financed by a windfall tax on energy companies.

Background

The September 2022 CfM survey asked the members of its UK panel how best to support households facing rising energy costs.

Responding to the Energy Cost Crisis

Background

With the world gradually recovering from the economic effects of the COVID-19 pandemic, the Russia-Ukraine war is a devastating problem which threatens the already-fragile economies of the world. The January CfM survey pointed out how supply-chain disruptions caused by the pandemic have led to surging global inflation, particularly in energy prices. With Russia as a major energy supplier to European countries, the economic effects of the war have been felt severely across Europe, and the UK has been no exception. The UK CPI-H annual rate in August was 8.6%, the Bank of England August forecast had inflation peaking at 13%, although of course must has transpired in the past month.

Ofgem, the energy regulator in Great Britain, introduced an energy price cap in 2019 to safeguard consumers against high energy prices. The price cap limits the fee an energy supplier can charge per day, for households that are on a fixed monthly tariff, or per kWh for households on a variable tariff. In August 2022, Ofgem announced that the price cap would increase to £3,549 for an average household from October 2022 and would likely rise in the following months. Under growing public pressure, the UK government announced the Energy Price Guarantee on September 8, to supersede the price cap. The main highlights of the scheme are –

  • The Energy Price Guarantee caps energy prices at 34p/kWh for the next 2 years, from 1 October 2022. This is estimated to ensure that a typical household in Great Britain pays an average £2,500 a year on their energy bill,.
  • The Guarantee is effectively a cap on gas and electricity unit prices and on standing charges for each fuel, so actual bills will be determined by usage.
  • Green levies have been temporarily removed from household bills, which will save households £150 annually.
  • The government will offer equivalent support to businesses and other non-household energy users for 6 months.

These initiatives were be launched alongside the already implemented Energy Price Discount, which gives households £400 off their energy bills over a 6-month period.

In addition, the government underlined steps to boost energy supply by increasing fossil fuel supply. Among other steps, the government removed the moratorium on UK shale gas production, launched a new oil and gas licensing round and decided to launch a review to re-evaluate meeting the net zero 2050 target in an ‘economically efficient way’ – likely to slow down the transition towards renewable sources to ease the impact on businesses.

The UK Government will pay suppliers the difference between the wholesale price for gas and electricity they pay and the amount they can charge customers. The cost of the package remains uncertain, but think tanks estimate that the cost will exceed £100 billion (close to 4% of GDP) across the next year alone. The government has ruled out funding this programme using a windfall tax on energy companies, with Prime Minister Liz Truss claiming that such a move would reduce investment in the UK and halt growth. Instead, the government will likely fund this programme through increased borrowing

While some have praised the government for the size and scale of the scheme, it has also come under criticism for a variety of reasons. One of the main criticisms of the scheme is its dependency on borrowing and taxation for funding. The Institute for Fiscal Studies (IFS) estimates that every additional £1 households spend on energy will likely cost the government 75p over the next year, making the scheme unsustainable in the long run. Other think tanks have criticized the government’s refusal to tax energy companies for the record-breaking profits they have earned during the crisis and have argued that the money being poured into this scheme will only add to the excess profits enjoyed by oil and gas giants. Prime Minister Truss has ruled out taxing oil companies’ profits (or “excess profits”) to fund household support. This reverses former Chancellor Rishi Sunak’s announcement in May of an energy profits levy.

Another source of concern is that this scheme merely treats the symptoms of the problem but does not address its root cause – an energy supply shortage. Energy supply is low due to the embargos imposed on Russia, and consequently, some users of energy will have to reduce their energy consumption to address this mismatch. However, by artificially deflating the price of energy, consumers have lesser incentives to reduce their consumption. With supply expected to remain short over the coming years and no decline in demand, the government’s intervention will likely have to be extended over a significant time horizon, adding pressure onto its budget. The IFS further notes that if other European countries attempt to subsidise energy costs for their consumers, it could lead to a bidding war that raises the cost of support for everyone. With demand outstripping supply, there is also an increased risk of blackouts and/or a need for energy rationing.

Think tanks have also criticized the government for their rollback on decades of climate policy by ending the moratorium on fracking and removing green levies from energy bills. Suggestions have been made to reduce dependency on fossil fuels by shifting to renewables to ensure UK’s long-term energy security, as well as to increase the energy-efficiency of UK households via insulation and better architectural design to reduce energy demand in the long term.

Experts have also criticized the scheme as ‘very poorly targeted’ as it disproportionately benefits the richest households who also have the highest energy consumption. The IFS estimates that half of the giveaway will go to the top half of the income distribution. Think tanks have proposed a variety of alternative schemes to provided targeted support to the poorest households, including a price cap, payments to households based on past energy consumption, a ‘social tariff’, and a universal provision of a fixed amount of energy at a regulated price to avoid sudden price shocks.

This month’s CfM survey asks about the government’s energy policy proposals. Panelists were first asked whether the energy price caps will leave the average UK household better off. They were then asked for the best way to address the problem of high energy costs and their impact on the cost of living. Finally, they were asked whether a windfall tax on energy should be used to offset part of the cost of the energy subsidy.

Question 1: Overall, which of the following best characterises how the government’s proposed energy policies will leave the average UK household over the medium term:

Twenty-six panel members responded to this question. They were evenly split between those believing that the policies would leave households better off and those that think the average household will be worse off (nearly 43% each). The remaining 15% thought households would be neither worse nor better off.

Several panellists agreed that although it the government could have done a better job in targeting the policies, the policy would provide relief to households. Roger Farmer (University of Warwick) summarises this view: “The fact that the policy may be poorly targeted does not take away from the fact that it will substantially reduce energy bills for UK households.” This stance is supported by Nicholas Oulton (London School of Economics), who mentions that the average household is “better off this year with the cap than without any assistance at all.” He states that the cap should be thought of as a “consumption-smoothing scheme”, which would have been virtually impossible for individuals to replicate privately, and hence, was a necessary intervention.

Opponents of the policies argued that the policies did nothing to tackle the main cause of the crisis – an energy shortage. Ethan Ilzetzki (London School of Economics) sums up the situation: “There is simply less fuel to go around and someone needs to consume less.” He further points out that the government’s policies are “very untargeted and far too costly.” These statements are echoed by Martin Ellison (University of Oxford), who highlights the need for the UK to “adjust” to rising energy prices in the medium term. With the government funding its policies through increased borrowing, he predicts that this situation “can only make the average UK household worse off” in the medium term.

Question 2: Which of the following is the best way to address the impact of rising energy costs on household finances?

Twenty-six panel members answered this question. A majority of 65% of the panel would have preferred to allow energy prices to increase and to make conditional or targeted payments to households in greater need. And additional 23% accept the logic of price caps, but would like to see them be conditional on the amount of energy consumed, to incentivise households to reduce their energy consumption. Only 8% support the government’s across-the-board price cap as their preferred policy.

Most panellists stressed the need to let the market system function without interference, and instead, support the financially vulnerable through conditional or targeted transfers. Jumana Saleheen (Vanguard Asset Management) explains that the market price should be allowed to “clear the market”, as it would ensure that people who can afford to cut energy use would reduce their demand in line with the rising prices. While this would incorporate the true price of energy in people’s choices, Stephen Millard (National Institute of Economic and Social Research) highlights the importance of protecting the financially vulnerable through “redistribution” of wealth using conditional/targeted transfers.

Jagjit Chadha (National Institute of Economic and Social Research) expressed support for an alternative policy – price caps based on energy use. He noted that this policy would not only be “progressive”, but would “encourage economies of usage”, paying for itself without increasing public debt in the long run. While supporting this policy as “the economist’s choice”, Roger Farmer pointed out that uniform price caps are “easy to understand and relatively easy to implement”, making them more politically feasible in the UK.

However, not all panellists oppose the government’s universal price cap. Nicholas Oulton describes the current situation as an “emergency”, which requires a scheme that “doesn’t unintentionally leave a lot of people unprotected”. He further notes that given more time and better technology, a “superior” policy could be designed, but the government made the best of what they had. James Smith (Resolution Foundation) expressed similar views, stating that there is “currently no mechanism” for delivering targeted interventions, which is why the government is justified in implementing blanket price guarantees.

Question 3: Should a windfall tax be used to (fully or partially) finance support to households?

Twenty six panel members answered this question. A majority of 72% supports taxing the excess profits of energy companies.

Most panellists believe that a windfall tax is appropriate in the current situation to support the public and prevent energy producers from earning exorbitant profits during the crisis. Simon Wren-Lewis (University of Oxford) stating that there is “no economic reason to allow energy producers to keep the gains from unusually high energy prices when their costs have not changed.” Martin Ellison (University of Oxford) further argued that there isn’t a need “to worry too much about the incentive effects of a windfall tax on energy companies.” Citing the management of UK War Loans as an example, he states that windfall taxes are a palatable option when the economy’s stability is threatened and wouldn’t necessarily lead to long-term consequences.

However, several panellists expressed their concern for the potential negative precedent that would be set by a windfall tax for future investments. Ricardo Reis (London School of Economics) summarises this, claiming that such a move would “discourage investments on energy supply for the future.” Stephen Millard reiterated this sentiment, stating that “although windfall taxes are economically efficient, if energy companies expect their profits to be subject to a windfall tax whenever prices rise, they will be disincentivised from investing.” He argues that this could have detrimental long-term consequences, as these companies will likely lead investments into green technology that will help the UK move towards net zero.

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How the experts responded

Question 1

Participant Answer Confidence level Comment
Ethan Ilzetzki's picture Ethan Ilzetzki London School of Economics Substantially worse off Extremely confident
Given the events since September 23, this question is easy to answer. The interest rate increases that this package, together with unfunded tax cuts, will cost households far more in mortgage interest payments than they will save in energy bills. Even absent the unanticipatedly rapid pace of interest rate hikes, this policy would have been very untargeted and far too costly. There is simply less fuel to go around and someone needs to consume less. Ideally, it should be "luxury" usage of energy rather than "necessity" use, but the price cap does nothing to ensure this.
Martin Ellison's picture Martin Ellison University of Oxford Substantially worse off Confident
Energy is going to get more expensive in the medium term due to geo-political instabilities and climate change, and the country needs to adjust to that. Shockingly, the government’s energy policies offer no incentive for households and firms to reduce energy use. In the medium term this can only make the average UK household worse off. The government has its head in the sand, borrowing on the country’s behalf to protect energy companies whilst doing nothing to wean households and firms off energy.
David Cobham's picture David Cobham Heriot Watt University Worse off Not confident
It's not clear what the counterfactual is. I'm assuming it is energy price increases as current, without UK government doing anything.
Wendy Carlin's picture Wendy Carlin University College London Worse off Confident
It's not clear what the counterfactual is but given the size of the negative external terms of trade shock, the average household will be worse off. This is exacerbated by poorly designed energy policy compounded by the recent fiscal policy mistakes - so definitely worse off than necessary.
John VanReenen's picture John VanReenen London School of Economics Better off Confident
James Smith's picture James Smith Head of Macroeconomic Policy, Resolution Foundation Substantially better off Very confident
Against a counterfactual of very sharp rises in household energy bills, the Government have provided huge (and expensive) support. See our (i.e. Resolution Foundation's) distributional analysis - Figure 5 in https://www.resolutionfoundation.org/app/uploads/2022/09/A-blank-cheque.pdf. The ex-post value of the EPG will depend on the market price of energy, however - and that remains extremely uncertain.
Panicos Demetriades's picture Panicos Demetriades University of Leicester Worse off Very confident
The government’s plans are short-termist at best and unsustainable, in the medium term, which means they will make UK households worse off, in the end, because of the additional distortions that they will create, it’s not a zero sum game but the pie is shrinking because of the newly introduced distortions. In addition, by undermining longer term efforts to address climate change, they make the younger generations seriously worse off. Any benefits to households will be short-lived.
Vincent Sterk University College London Better off Confident
Better off compared to doing nothing. Worse off compared to less blunt policy measures.
Nicholas Oulton's picture Nicholas Oulton London School of Economics Better off Very confident
Obviously the average household is much better off this year with the cap than without any assistance at all. In the medium to long run there is a loss from the higher price of imported energy which someone has to pay. I think the cap is best thought of as a consumption-smoothing scheme which individuals would have found it difficult or impossible to replicate privately. So to the question, who pays for it?, the answer is future taxpayers in proportion roughly to their income since our tax system is progressive. So the scheme spreads out over time the inevitable loss from higher energy prices . If the current level of energy prices proves to be permanent then the scheme will eventually have to be phased out. But this seems too pessimistic.
Michael McMahon's picture Michael McMahon University of Oxford No better nor worse Confident
Over the near term, the decision has clearly been to transfer a large part of the burden of the shock to energy prices to future generations. It is not clear whether the costs of this will start to kick in in the medium run so I voted for neutral but the I think the net effect will be positive in the near term and negative in the long-run.
Roger Farmer's picture Roger Farmer University of Warwick Better off Very confident
The fact that the policy may be poorly targeted does not take away from the fact that it will substantially reduce energy bills for UK households. The fiscal impact will raise debt in the short to medium term and has already had an impact on the exchange rate. I do not see merit in the argument that this will in any way lead to a balance of payments crisis for a country, like the UK, that borrows primarily in its own currency. The exchange rate drop will surely raise prices in the short term. How much is anybody's guess. In the medium to long term, much depends on the Bank of England reaction. I have no confidence in the current 'expert consensus' on the monetary policy transmission mechanism. Raising rates may stem the exchange rate fall and ameliorate the associated upward pressure on UK prices, but it will also likely trigger a recession.
Michael Wickens's picture Michael Wickens Cardiff Business School & University of York Better off Confident
This is a short-term measure to deal with the gas price rise caused by the attack on Ukraine. It was made worse by the decision to stop storing gas which removed an important price buffer. It should have been better targeted. The current crisis is partly self-induced due to the failure to replace fossil fuels in the premature dash to a zero carbon economy. We still don't have a long-term solution.
Jagjit Chadha's picture Jagjit Chadha National Institute of Economic and Social Research No better nor worse Confident
The costs of the cap will increase public debt so over the medium or long term, households may have lower energy costs today but higher public debt in the future. There are some benefits from an element of progressiveness but direct financial support and an extension of Universal Credit would have been better targetted. That inventories and other measures to stabilise supply are absent is a failure. It is also important that there are price incentives to economise of the usage of a scare-pollluting energy source.
Alessandra Bonfiglioli's picture Alessandra Bonf... Queen Mary University of London Better off Not confident
Ricardo Reis's picture Ricardo Reis London School of Economics Worse off Very confident
Price caps are a very bad idea, especially if they bind by as much and for as long as this one might well do.
Andrea Ferrero's picture Andrea Ferrero University of Oxford Worse off Confident
The package is regressive and adds to the negative financial markets response to the mini budget.
Wouter Den Haan's picture Wouter Den Haan London School of Economics Better off Not confident
Better off but not a lot
Gino A. Gancia's picture Gino A. Gancia Queen Mary University of London No better nor worse Confident
Lucio Sarno's picture Lucio Sarno Cambridge University Worse off Confident
Simon Wren-Lewis's picture Simon Wren-Lewis University of Oxford Better off Confident
I expect these policies will be temporary, and funded by raising debt to a new higher level, with no policies in the medium term to reduce that higher debt to GDP level. Current households will be better off, and either future generations will be slightly worse off (if r>g) or higher debt/GDP will gradually decline (r<g).
Paul De Grauwe's picture Paul De Grauwe London School of Economics Better off Confident
Stephen Millard's picture Stephen Millard National Institute of Economic and Social Research Worse off Very confident
They will be better off relative to the counterfactual of 'no support'. But energy prices are still rising and this means the average household will be worse off.
Costas Milas's picture Costas Milas University of Liverpool Worse off Confident
Linda Yueh's picture Linda Yueh London Business School Better off Not confident
Benjamin Moll's picture Benjamin Moll London School of Economics No better nor worse Not confident
Natalie Chen's picture Natalie Chen University of Warwick Worse off Confident

Question 2

Participant Answer Confidence level Comment
Ethan Ilzetzki's picture Ethan Ilzetzki London School of Economics Conditional/targeted transfers Very confident
Collectively, we need to consume less energy this winter. Households in need should be supported holistically, not only their energy use. Households that are doing well can afford higher energy costs or may choose to cut their consumption.
Martin Ellison's picture Martin Ellison University of Oxford Conditional/targeted transfers Confident
It’s a toss-up between conditional/targeted transfers and price caps based on energy use. Given the urgency of the situation, there’s a strong case for a speedy uplift in conditional and targeted transfers to the low-income households that are really squeezed by increases in energy prices. Price caps based on energy use have more appeal in the longer run, although there are better ways of redistributing income and wealth. Fixed-sum transfers to all households is a terrible policy.
David Cobham's picture David Cobham Heriot Watt University Price caps based on energy use Not confident
Wendy Carlin's picture Wendy Carlin University College London Conditional/targeted transfers Not confident
This is a very complicated market, which I don't fully understand..And I don't understand the ramifications of the various policies (e.g. for the providers). Policy design should ensure fair access to energy, abolish the standing charges, and maintain a price signal to incentivize energy conservation.
Jumana Saleheen's picture Jumana Saleheen Vanguard Asset Management Conditional/targeted transfers Very confident
Standard economic analysis tells us that the best way to address the rising cost of energy bills on household finances is to provide targeted transfers to the households that need it. The intuition here is that society can reach a higher level of welfare when prices are not distorted through taxation and subsidies. Instead, the market price is allowed to ‘clear’ the market. Those who can pay the higher price do so, with a share of them adjusting their demand down in response to the higher price. Those who cannot afford the essential level of heating costs are provided a lump-sum transfer from the government to purchase the essential levels of energy.
James Smith's picture James Smith Head of Macroeconomic Policy, Resolution Foundation Conditional/targeted transfers Very confident
The key role for fiscal policy here is to provide targeted support for those who face hardship in the face of rises in energy prices that households could not foresee or hedge themselves against. Achieving that requires detailed information on household income and energy needs (the trouble is that, in practice, there is currently no mechanism for delivering this, hence the blanket price guarantees).
Panicos Demetriades's picture Panicos Demetriades University of Leicester Conditional/targeted transfers Extremely confident
Targeted transfers are fairer and also reduce the burden on the taxpayer.
Vincent Sterk University College London Price caps based on energy use Confident
Targeted transfers might be better in principle, but it is not clear whether this is practically achievable given the urgency of the situation.
Nicholas Oulton's picture Nicholas Oulton London School of Economics Uniform price caps Confident
We are in an emergency so we need a scheme which works and doesn't unintentionally leave a lot of people unprotected (think the bedroom tax). The present scheme seems to fit the bill though no doubt given enough time and better computer systems a superior one could be devised.
Michael McMahon's picture Michael McMahon University of Oxford Conditional/targeted transfers Confident
In terms of the crisis, policy is not able to offset the high energy costs and so the question is how to distribute the costs. Targeted transfers can do this. And given the need to reduce energy usage to try to achieve climate goals, allowing prices to rise especially for heavier users can help too. Failing this, a lump sum transfer at least has the property of being relatively more valuable for poorer households. that it can
Roger Farmer's picture Roger Farmer University of Warwick Price caps based on energy use Not confident
Much depends on the trade off between simplicity and effectiveness. Price caps based on energy usage have the advantage of providing an incentive to economize on energy. This is the economist's choice. Uniform price caps, on the other hand, have the advantage of being easy to understand and relatively easy to implement. This is the politician's choice.
Jagjit Chadha's picture Jagjit Chadha National Institute of Economic and Social Research Price caps based on energy use Very confident
Energy usage is highly correlated with income. So increasing costs with usage is not only progressive but also encourages economies of usage and would pay for itself i.e. with increasing public debt. We do though also need some direct support for the poorest households with large families and/or those in poorly insulated housing. Again Universal Credit can help here. As would the old Child Benefit.
John VanReenen's picture John VanReenen London School of Economics Conditional/targeted transfers Confident
Alessandra Bonfiglioli's picture Alessandra Bonf... Queen Mary University of London Conditional/targeted transfers Not confident
Ricardo Reis's picture Ricardo Reis London School of Economics Conditional/targeted transfers Very confident
Some ex post transfers to fix lack of social insurance ex ante, albeit with a great deal of humility on what can be achieved.
Andrea Ferrero's picture Andrea Ferrero University of Oxford Conditional/targeted transfers Confident
Wouter Den Haan's picture Wouter Den Haan London School of Economics Conditional/targeted transfers Not confident
It is important that we incorporate the true price of energy in our choices. But that doesn't mean that we shouldn't help those for whom this will lead to financial difficulty.
Gino A. Gancia's picture Gino A. Gancia Queen Mary University of London Price caps based on energy use Not confident
Lucio Sarno's picture Lucio Sarno Cambridge University Fixed-sum transfers to all households Confident
Simon Wren-Lewis's picture Simon Wren-Lewis University of Oxford Conditional/targeted transfers Very confident
Transfers should be based on both income levels and (previous) energy use. This preserves strong incentives to reduce energy use, and gets money to those who most need it.
Paul De Grauwe's picture Paul De Grauwe London School of Economics Conditional/targeted transfers Confident
Stephen Millard's picture Stephen Millard National Institute of Economic and Social Research Conditional/targeted transfers Very confident
There are two issues here. We should let the price mechanism work to determine overall demand for energy, which is why I would not support a cap. And we should deal with the issue of the poorest households being hit particularly badly via redistribution.
Costas Milas's picture Costas Milas University of Liverpool Conditional/targeted transfers Confident
Linda Yueh's picture Linda Yueh London Business School Uniform price caps Confident
Benjamin Moll's picture Benjamin Moll London School of Economics Conditional/targeted transfers Very confident
Natalie Chen's picture Natalie Chen University of Warwick Price caps based on energy use Confident

Question 3

Participant Answer Confidence level Comment
Ethan Ilzetzki's picture Ethan Ilzetzki London School of Economics Yes Not confident
Martin Ellison's picture Martin Ellison University of Oxford Yes Confident
The management of the UK War Loans offers evidence that we do not need to worry too much about the incentive effects of a windfall tax on energy companies. War Loans were taken out to fund the Great War at an interest rate of up to 5%. When interest rates fell to 2.5% in 1932, Neville Chamberlain announced that the government would exercise its right to call the loans, offering either cash or to continue the loan at 3.5%. Although unexpected, this did not reduce the appetite of investors to lend money to the government. The lesson is that a windfall tax is appropriate when there’s a problem big enough to threaten the stability of the whole economy.
David Cobham's picture David Cobham Heriot Watt University Yes Very confident
Wendy Carlin's picture Wendy Carlin University College London Yes Extremely confident
For fairness and efficiency reasons.
John VanReenen's picture John VanReenen London School of Economics Yes Very confident
James Smith's picture James Smith Head of Macroeconomic Policy, Resolution Foundation Yes Confident
Classic (and pure) windfall for many energy producers means strong case for windfall taxes.
Panicos Demetriades's picture Panicos Demetriades University of Leicester Yes Extremely confident
A windfall tax is by definition not distortionary. It’s also fair and reduces the need for the government to borrow, easing pressure on interest rates and monetary policy.
Vincent Sterk University College London Yes Not confident
Nicholas Oulton's picture Nicholas Oulton London School of Economics No opinion or other Not confident
Since the government needs to raise more money anyway a windfall tax shouold not be ruled out permanently. But I do take seriously the argument about sending the wrong message to business.
Michael McMahon's picture Michael McMahon University of Oxford No opinion or other Not confident at all
Roger Farmer's picture Roger Farmer University of Warwick No Confident
Michael Wickens's picture Michael Wickens Cardiff Business School & University of York Yes Not confident
The windfall gains are a rent and rents like this are taxable. This leaves the issue of what to do if there are windfall losses in the future.
Jagjit Chadha's picture Jagjit Chadha National Institute of Economic and Social Research No opinion or other Very confident
Like do many industries, we desperately need business investment. It is no different for energy companies, at a time when the supply chain and inventories need building up and we are concerned about energy security. So we should not think of a windfall tax as something the state can just have back. We need to design tax and investment credits to push foward the investment agenda. One could imagine the tax being used as an incentive to invest, if credit were given against specific investments.
Alessandra Bonfiglioli's picture Alessandra Bonf... Queen Mary University of London Yes Confident
Ricardo Reis's picture Ricardo Reis London School of Economics No Very confident
Will discourage investments on energy supply for the future. I'm not extremely confident of this because of the tendency, in the other direction, to bail out large powerfully-connected companies (like energy producers) when they have extraordinary losses.
Andrea Ferrero's picture Andrea Ferrero University of Oxford Yes Very confident
Wouter Den Haan's picture Wouter Den Haan London School of Economics Yes Confident
On the one hand it wouldn't matter much where the money comes from, but in terms of establishing a society in which it seems we care about each other this would be a good thing to do.
Lucio Sarno's picture Lucio Sarno Cambridge University Yes Not confident
Simon Wren-Lewis's picture Simon Wren-Lewis University of Oxford Yes Extremely confident
I can see no economic reason to allow energy producers to keep the gains from unusually high energy prices when their costs have not changed, and when you do not want to give them further incentives to extract more carbon because of man-made climate change.
Stephen Millard's picture Stephen Millard National Institute of Economic and Social Research No Confident
Although windfall taxes are economically efficient, if energy companies expect their profits to be subject to a windfall tax whenever prices rise, they will be disincentivised from investing. And this is particularly important as we want them to be leading investment into the green technologies that will help the UK move towards net zero.
Paul De Grauwe's picture Paul De Grauwe London School of Economics Yes Very confident
Costas Milas's picture Costas Milas University of Liverpool Yes Confident
Linda Yueh's picture Linda Yueh London Business School Yes Confident
Benjamin Moll's picture Benjamin Moll London School of Economics No opinion or other Not confident
Natalie Chen's picture Natalie Chen University of Warwick Yes Confident