The Left have seized this opportunity to demand a windfall tax – an economically illiterate move that would disincentivise investment, reduce output, and increase prices for customers, all in the name of tackling rising costs. Some credit can be handed to the Government in resisting these calls, but it is introducing sticking plasters while being too timid to tackle the root of the problem.
The energy price cap has risen a record 54pc, with the Treasury responding with a “rebate and clawback” proposal. This may provide partial relief, but no offer has been made to simplify North Sea regulations or unblock fracking. There are no plans for a strategic gas reserve.
Instead, the “leave it in the ground” mentality prevails, prices rise, and energy insecurity endures. The Government only wants to talk about Net Zero, or more renewables and electrification. But it has no credible alternative to gas to provide power and heat when the wind isn’t blowing.
Without big business operating in the North Sea, we will find ourselves at the mercy of dominant suppliers controlled by sometimes malevolent states rather than private enterprise.
Though energy is the most obvious example, the ESG zeitgeist has expanded to cover all sectors of our economy. In publishing, self-righteous junior staffers insist that their bosses confess to their privilege and ban writers. Rock stars insist that Spotify dissociate from Joe Rogan.
Woke politicians, pressured by activists, make driving a car seem sinful. Restrictions on advertising “junk food” limit choice and burden businesses, all in the name of public health. We’ve been led to believe that regulating things improves capitalism – but the energy cap fiasco should give us pause.
Labour market regulations, introduced under the misapprehension that business owners are unscrupulous and exploitative, deters company growth, and politicians are later surprised and angry that zero-hour contracts and the gig economy emerge.
And ministers respond to innovative employment possibilities with regulations and higher costs, for instance putting the competitive fares that helped revolutionise travel for consumers at risk.
Politicians who’ve never had a job outside Westminster, never needed to meet a payroll, never had sleepless nights wondering if their business will survive, are now expecting companies to be social activists – regardless of how this affects customers or investors. It is not enough for firms to make life better through the efficient provision of goods and services. They have to champion fashionable causes, become brands with purpose, save the planet.
Milton Friedman’s shareholder primacy might be viewed as grubby by the political class, but studies show that price remains overwhelmingly the most important factor for UK consumers.
Inflation could remain in the 5pc to 10pc range for another year. Those on low incomes may be forced to choose between heating and eating. If ever there was a time for politicians to start extolling the benefits of the profit motive, it is now.
Annabel Denham is the director of communications at the Institute of Economic Affairs
