Union chief calls for oil windfall tax

Derek Simpson is co-head of the Unite union and has suggested that Gordon Brown should set up a Windfall Tax on the profits of Oil companies. The 57-year-old is a former Communist who has been a Labour Party member for the past 10 years. Unite are Labour’s largest contributor with 1.9m members.

Now obviously this is a good idea because Oil Companies in the UK are making billions of pounds of profit and this is not good for anyone especially the non-union (mostly) workers they employ. Mr Simpson reckons

This was the type of policy that would chime with the electorate, in contrast to more esoteric measures such as increasing terror suspect detention or giving workers more flexible working. “Neither addresses the concerns of real-life people,”

Of course what Mr Simpson hasn't quite worked out is that if Oil Companies are taxed like this then they will just change the course of their future investments and naturally enough they will change them to other countries that have a more stable tax regime. This will mean greater reliance on foreign Oil and Gas, reduced employment and lower Tax income. We have already seen this when Gordon Brown increased the Corporation Tax take from Oil companies back in 2005, the result, a cutback in investment just after he had asked for an increase in the supply from the same Oil Companies.

Also, a minor point that Mr Simpson might have missed is that Gordon Brown is already receiving a rather substantial £6bn windfall from the increased tax take that the increased cost of oil is currently delivering to the Exchequer. It is currently estimated by Vince Cable of the Liberal Democrats that Government tax revenues from North Sea oil could rise this year from £10bn (based on oil prices of $84 a barrel) to £16bn (at $128) mainly from oil company profits and petroleum revenue tax.

Then again this tax windfall might just be reduced if the SNP's Alex Salmond gets his way. He has sent Alistair Darling a£500m invoice, He reckons this is 10% of the windfall going to the Chancellor since basing his Budget on much lower oil prices than now prevail.

It is exactly this sort of short-term thinking that has caused many of the problems we are now seeing in our economy. Decisions taken for short-term gain versus long-term stability.

FT.com / World - Union chief calls for oil windfall tax