The excess profit tax that is now in the air with the anti-inflation package will motivate the energy companies to lower prices, and the reduction in energy prices must then also lead to the lower costs being passed on, as Nehammer summarized the strategy pursued by the government. Directly fixed electricity and gas prices are not an option for a liberalized market like Austria, since cheaper energy is immediately bought from abroad.
In contrast, the law on profit skimming that has now been passed should very well have an effect in the form of falling prices, Nehammer defended the procedure. “We are now monitoring very closely whether the measures are having an effect.” If not, the government will “take further measures to help people,” said Nehammer. However, a reduction in VAT for groceries was avoided because that is still no guarantee that “prices will really fall”, as Nehammer noted in ZIB2.
Energy as the “main driver” of inflation
Heated inflation and tempers
Finally, Nehammer justified the skimming off of profits with the fact that wholesale prices fell from more than 500 euros per MWh to less than 150 euros per MWh last year, while prices for private households more than doubled.
If the energy companies do not quickly lower their prices for consumers, the government wants to tighten and expand profit skimming. “Our measure means a reduction of the end customer price by more than a third for the prices of the currently most expensive provider,” Nehammer said after the Council of Ministers at a joint press conference with Vice Chancellor Werner Kogler (Greens). With a view to energy prices, he noted that the approach taken here by the corporations not only caused inflation, but also heated people’s minds.
Some of the money skimmed off should go to the federal states and municipalities, which will refrain from increasing fees. In addition to the increased pressure on energy, the package of measures announced by the government also includes a tightening of competition law. In addition, fees are to be frozen or reduced.
Measures against inflation
The government announced three measures on Wednesday that are intended to curb inflation and the consequences for the population. The pressure on energy companies is increasing, competition law is to be tightened and fees frozen or reduced. There will be no reduction in VAT on groceries.
Advance payment can be adjusted more often
The tightening of the excess profit tax is to come into force as early as June by changing the corresponding threshold value in the Energy Crisis Contribution Act. According to Nehammer, this will lead to a one-third reduction in the end customer price for what is currently the most expensive energy supplier.
Households that already have a “smart meter” will in future have the right to monthly billing, which should lead to more transparency and an overview of the costs. Advance payments should in future be able to be adjusted every six months, not once a year, as was usually the case in the past.
More rights for competition authority
Grocery chains are to be put under more pressure by increased price transparency. Admittedly, the measures are very indirect in nature: in the future, the government intends to regularly publish the purchase prices of food retailers in a food transparency report based on defined foods.
Furthermore, the food trade must announce the quantities of food it makes available to non-profit organizations as donations in kind. It must also be disclosed how much food was destroyed.
And the competition authority should be given more powers – no specific measures were mentioned. This is likely to be all the more difficult as the ÖVP and the Greens have not been able to agree on the appointment to the top of the authority for years.
Federal government freezes fees
All federal fees will remain frozen in the coming year and will not be adjusted for inflation. The currently suspended electricity and natural gas tax will also be extended by six months. In addition, there is a recommendation to the municipalities that they reduce their fees – such as sewage and waste fees.
As an incentive, municipalities that do this should be compensated by the federal government. This is to be financed from the additional income from the increased taxation of excess profits from energy companies. According to their own statements, the ÖVP and the Greens expect additional income of around 400 million euros.
Nehammer and Kogler protested against criticism that the government had been inactive. Due to measures – above all the abolition of cold progression and the valorisation of numerous social and family allowances – the purchasing power remained very high in international comparison despite the inflation. Austria is also doing very well in other key economic figures, such as unemployment.
Against VAT reduction
Nehammer criticized numerous proposals recently formulated by the opposition and experts, such as reducing VAT on food. The proposals vary greatly, and there is often no guarantee that prices will actually fall as a result. Both Nehammer and Kogler emphasized that there can be no simple answers to complicated problems.
It is important not to fuel inflation with the measures. And Nehammer said: One was “against the nationalization of losses and the privatization of profits”. Several of the measures now announced had been proposed a few days earlier by economists who had publicly called on the government to act quickly, but had also warned against further major spending.
praise and criticism
The day before, WIFO boss Gabriel Felbermayr had already warned domestic politicians not to underestimate the consequences of high inflation and called for swift action. After the package was presented, Felbermayr responded with praise. All measures taken individually are correct. But the package is too small. Further measures will be needed, the government must “continue to improve”.
IHS Director Klaus Neusser does not expect the package to make a major contribution, but it will make a lasting contribution to curbing inflation. According to Neusser, there will be more pressure on energy companies and donations for social markets. He expects hardly any effect from the fee freeze.
SPÖ: Not a single price will go down
SPÖ vice club boss Jörg Leichtfried, on the other hand, accused the government of not lowering a single price in the supermarket with the measures. On Friday there is a special session on inflation requested by the SPÖ.
FPÖ club boss Herbert Kickl spoke of a “beating around the bush”. According to Kickl, direct price interventions on energy and a reduction in VAT on food would have been necessary. The government package is a “stun grenade without any effect”.
According to NEOS spokesman Gerald Loacker, the government is sending the money in circles after having fueled inflation itself with its watering can policy. The federal and state governments have long been able to reduce the prices of the energy suppliers, the fees and rents for municipal housing. The package is “absolutely not guaranteed” that people would feel any relief.
Kocher: Discussions on price transparency on Friday
ÖVP Economics Minister Martin Kocher emphasized the goal of strengthening competition and thus reducing energy prices and other prices in the short and medium term. For Friday, Kocher announced talks with experts and the federal competition authority about measures for more price transparency.
Finance Minister Magnus Brunner (ÖVP) referred to the budgetary context: the deficit should be halved in order to get back on a sustainable budget path after the crisis. Therefore, “expansive” measures, i.e. additional aid payments, “are no longer expedient”.
Van der Bellen wants to “take a close look”
Federal President Alexander Van der Bellen announced that he would keep an eye on the measures announced by the government. “The federal government presented further measures today. I will make sure that these are implemented quickly and effectively,” the head of state said on Twitter.
The consequences of inflation are affecting more and more people, according to Van der Bellen, who visited debt counseling in Vienna. The continuing rise in prices is a major task for Austria. “Everyone has to feel the cohesion and solidarity of all of us and also see that in their wallets,” explained Van der Bellen.
