British Prime Minister Gordon Brown on Thursday ruled out imposing a special tax on energy companies' windfall profits, defying pressure from trade unions and members of his own Labour Party.
With his popularity plunging, Brown is fighting for political survival as the economy dices with recession, hit by the global credit crunch and a sharp rise in food and fuel prices that is hurting consumers.
His refusal to bow to the demands of Labour's traditional backers, the unions, and a rising chorus of calls from party left-wingers promise to make his appearance at this month's annual party conference a difficult one. "We looked at all possible options of both raising money and the action that we could take," he told his monthly news conference. "Instead of a windfall tax, this is the better way of moving forward."
The six major energy suppliers will instead contribute to a one billion pound ($1.75 billion), three-year energy-saving initiative to help those struggling to pay soaring fuel bills. Environment Secretary Hilary Benn said pensioners and people on low incomes or welfare benefits would receive free home insulation to help cut their bills, while others would receive a 50 percent discount.
Brown is hoping the initiative will bolster his flagging opinion poll ratings and combat calls from within Labour to step down. But the unions dismissed the move as missing a golden opportunity and age concern groups said it was far too timid.
"It is, quite frankly, ridiculous to believe that this measure is a complete or even partial solution," Derek Simpson, joint leader of the Unite union, told BBC television. Brown's woes were compounded as a "poll of polls" in the Independent newspaper showed that his attempted fightback was having no effect, despite a move last week to boost the falling housing market with help on a house purchase tax and a package to support first-time buyers.
The ComResIndependent poll showed Labour down one point at 26 percent with the main opposition Conservatives up one point on 45 percent. It would give them a parliamentary majority of 174 seats if an election, due by mid-2010, was held now.
The economic outlook remains tough. A Reuters poll of economists on Thursday put the chances of Britain skidding into recession over the next 12 months at 55 percent, up 10 percentage points on a month ago. Amid the controversy over fuel costs, it emerged that a senior executive at the British subsidiary of German energy firm E.ON had said rising prices, with winter approaching, would mean more money for the company coffers. E.ON apologised and the remark was roundly condemned.
The government's proposal was also attacked by lobby group Help The Aged. "This is a flimsy and failing package which does little to help older people struggling to cope with soaring fuel bills," it said in a statement. "Half-baked measures such as these are not going to address the social emergency of fuel poverty." Help the Aged and green campaigners Friends of the Earth said they were taking the government to court for failing to keep its pledge to eradicate fuel poverty - defined as 10 percent of household income being swallowed by energy bills.
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