The simple reason for this disparity is that in Britain there are still up to five million households living in fuel poverty – which Labour ambitiously pledged to eliminate by 2016.

This now looks a distant target following the 104 per cent rise in the price of gas, and the 93 per cent increase in electricity, since 2003.

Ten years ago, after privatisation, there were 20 energy companies competing for business in the UK. Now, six "brothers" – Npower, EDF Energy, British Gas, Scottish and Southern Energy, EON UK and Scottish Power – dominate our energy supply market.

To some extent, they are vertically integrated giants controlling the production, distribution and the retailing of gas and electricity.

The soon-to-be-abolished consumer watchdog, Energywatch, has identified 20 different examples that illustrate deficiencies in the energy market, including lack of transparency, information and
the market dominance of the big six.

Given this background, real momentum has built up behind the proposal for a windfall tax on the gas, electricity and oil companies. The problem is, would it work?

One of the keys to the success of a windfall tax is the precision of definition of those who are being taxed and what they are being taxed upon.

In 1997, after years of planning and a manifesto commitment, Labour targeted the privatised utilities and the windfall gains they made by being sold off too cheaply. A decade later, there is much less clarity about what is being proposed, the Government is politically weaker and is dealing largely with foreign multinationals rather than domestically-owned utilities.

Some who make reference to Barack Obama's plans to tax oil companies on oil sold at more than $80 a barrel want a similar tax on the likes of BP and Shell.

The only problem is that, as far as domestic production is concerned, Labour has been there and done that already, and it is hard to see how, in reality, oil production in the Middle East can be taxed.

In 2005, Gordon Brown doubled the supplementary charge on North Sea oil producers from 10 to 20 per cent – a rise that was in addition to a petroleum revenue tax of 50 per cent. He added that there would be no further rises in the North Sea oil tax during this Parliament.

It is not necessary to be a red tooth and claw capitalist to recognise that further tax increases may deter future investment at a time when output is dwindling. Others have suggested a windfall tax on the six energy providers themselves.

Given their market power, they are likely to react to a tax by simply putting up prices, making the ordinary hard-working family pay the bill for any increased help for the poor.

It is perhaps also worth noting that price caps were still in place at the time of the windfall tax in 1997, but were abolished by Ofgem in 2002.

Many commentators believe that the energy market is rigged against the ordinary domestic and business consumer, but a windfall tax would leave that position unchanged.

The really radical thing to do would be for Secretary of State John Hutton to refer the energy supply market to the Competition Commission. He will have the chance to do this when Ofgem, after a great deal of reluctance, finally produces a report on the sector in a few weeks time. Such a reference would be popular with hard-pressed manufacturing industry as well as domestic consumers.

Labour should be proud of the powers it gave to the Competition Commission in the Enterprise Act 2002 to deal with concentrations of corporate power which are acting against the consumer interest.

Only the Competition Commission has the power to break up companies when it is necessary to promote competition – as it has said it is minded to do in the case of BAA (British Airports Authority).

Any Competition Commission investigation is going to take time and there is an urgent social imperative to act before the winter. The Government is right to play hardball in forcing significant concessions from the "big six" – particularly as regards conservation and assistance to poorer consumers.

There remains the option of adding amendments to the Energy Bill, which is still in the House of Lords, to increase the scope of regulation.

A general windfall tax on global energy companies could bog down a Labour Government in endless legal challenges while leaving pensioners shivering this winter.

A Competition Commission reference of the energy companies, together with stronger regulation now, whether on a statutory or voluntary basis, could bring both immediate help to consumers and
a clear demonstration to both domestic and business users of energy that the Labour Government is on their side.


John Grogan is the Labour MP for Selby.