Scottish Power's 47% profit surge revealed today is by definition a windfall gain, writes Patrick Collinson.
Are the hundreds of extra millions pouring into the company's coffers the result of brilliant management decisions? No. New North Sea gas finds? No. Massive capital expenditure and investment? No. Profits are up largely because the oil price has shot up, dragging gas prices up with it.
Management had almost nothing to do with it. Even the most hopeless, bungling chief executive of a utility company could not help but report extraordinary profits in such a climate of price rises.
As usual, the profit announcement is accompanied by PR spin: some words about measures to help customers on low incomes, how much the company is spending on new plant and equipment, efficiency drives and so on. But this lip service can't disguise the flabbergasting facts; your gas bill up 30%, their profits up 47%, their shareholders knee-deep in dividends. Oh, and there are more price rises in the pipeline.
Every October, the chancellor stands up and delivers the pre-budget report. Each time, he says something about the winter fuel allowance, and other measures the taxpayer must fund to alleviate "fuel poverty". It's time the chancellor increased the winter fuel allowance, extended its availability - and made the utility companies pay for it.
There is a precedent: in 1981 the chancellor and prime minister imposed a windfall tax on the banks. In 1997 Gordon Brown hit shareholders of the utilities with a £5.2bn windfall tax in reparation for the negligent under-pricing of the companies when they were first privatised.
Scottish Power's share of the windfall tax (29 companies were levied) was £317m. There was lots of bluster at the time about how the tax would inhibit investment, deter capital raising and so on, but nine years on there's no sign it did any lasting damage. Instead it paid for the welfare-to-work scheme that helped the big decrease in unemployment in the late 1990s.
This October a windfall tax to pay for a much-improved winter fuel allowance is about the least the utility companies should expect. But the zeal of 1997 when Labour took on the bloated utilities has long gone. The fact that the bicycling, eco-friendly David Cameron is more likely to tackle the power monopolies than Labour shows just how far, sadly, we've come.
