Windfall taxes, and why windfarm owners should start worrying

Windfall taxes are back in the news. The only surprise is that it took this long. After all, governments in financial trouble have only two real choices: they can dramatically cut public spending; or they can have a good look to see who has cash and they can help themselves to it.

I've said here several times that it makes sense to be cautious when investing in defensive' companies for the simple reason that the thing that makes them attractive to you cash and cashflow makes them attractive to the government. That was a point nicely proven by Sir John Major's call for a windfall tax on utility company profits this week.

Downing Street called the ex-PM's comments "interesting". You can also bet they'll be keeping a close eye on the reaction to the idea.

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But the utility companies aren't the only ones who should be shifting around nervously. Landowners in Scotland who are rolling around in wind turbine cash might want to start worrying too. Why? Because the redistribution of wealth from the rest of us to them via energy company bills really irritates a lot of people.

At the same time, a largish percentage of Scottish nationalists are firm believers in developing a high-tax, big-state nation (despite the fact that to an outsider's eye they already appear to live in one). So much so, that they demanded a debate on whether all on- and offshore renewable schemes should be legally obliged to hand a 51% shareholding to the state.

That might be a little extreme even for the SNP, but nonetheless the Scottish government review of land ownership has made it pretty clear that they will be looking for ways to "redistribute the cash wealthy lairds make from wind farms* to benefit the less-advantaged". Hello windfall tax.

This is all a bit circular, of course (taxing subsidies...). But that's modern policy for you.

*This is serious cash by the way. I've written on it here before, but the Mail on Sunday also enjoys a good rant on the issue. Their latest suggests that the Earl of Glasgow is set to make over £5m from his turbines, while the Earl of Moray will be getting over £7m. Nice work, etc.