The unspoken argument behind a windfall tax

The Financial Times story on Rishi Sunak looking at a possible windfall tax on energy firms captures how difficult such a tax is for any government, especially a Tory one. Because it begs questions why, when electricity suppliers suffered unsustainable losses in autumn and winter, when under the price cap they suffered huge and unsustainable losses – what you might call a reverse windfall – they were allowed to go bust.

If you believe in capitalism and competition, you believe in swings and roundabouts: windfall profits in good times are the obverse of extreme losses in the bad. Kwasi Kwarteng repeated that mantra as failing electricity suppliers would not be bailed out. Which presumably means he disagrees with the Treasury on a windfall tax on all energy producers (MPs on the business select committee will presumably ask him about this later today).

But the big point is that a rational government would either conclude that the energy market is fairly well functioning and competitive and would neither rescue the failures nor levy windfall taxes.