18 May 2022 | NEWS
Rishi Sunak hinted last night at introducing a windfall tax on energy companies to ease the burden of the cost-of-living crisis on the hardest-hit households.
It is understood in Westminster that Treasury officials have been tasked with examining a mechanism for such a levy. The first hints of the Chancellor’s warning came last week.
It comes as the Conservatives voted down the Labour motion on Tuesday night to introduce a one-off tax on major energy companies by 310 votes to 248, whilst 59 Tories abstained.
The Chancellor told MPs: “We on this side of the House don’t believe that windfall taxes are the simple and easy answer to every problem.
“But we are pragmatic, and what we want to see are energy companies who have made extraordinary profits at a time of accutely elevated prices investing those profits back into British jobs, growth and energy security.
“But as I have been clear and as I have said repeatedly, if that doesn’t happen soon and in signficant scale, then no option is off the table.”
Sunak also said the best way to raise living standards is to “grow the economy”.
The Government’s economic plan, along with announcements made in this year’s Queen Speech, will create “more jobs, more investment and, crucially, higher wages”, he concluded.
In response to the vote, Labour’s Shadow Chancellor Rachel Reeves said every Conservative MP who voted against the Opposition motion to introduce the tax “sent a clear message” that “they will not put working people first, and they have no answer on the cost-of-living-crisis”.
Shadow Environment Secretary and former Labour leader Ed Miliband said: “I think a massive U-turn is lumbering slowly over the hill.
“But I say this to the Chancellor: swallow your pride and get on with it. Because every day he delays is another day where the British people are denied the help they need.
“Millions of families are having sleepless nights because the Chancellor won’t act. What is he waiting for?”
Pressure on the Government to impose a windfall tax comes as energy giant Shell recently announced it had made triple profits in the first three months of this year, with competitors BP and TotalEnergies also reporting a sharp rise in underlying profits.
Shell made $9.13 billion (£7.3 billion) in the first quarter of this year, nearly triple the $3.2bn profit it announced for the same period in 2021, although the company also reported that it would lose $3.9 billion (£3.1 billion) since its decision to cease trading in Russian oil and gas following the country’s invasion of Ukraine.
Meanwhile, BP’s underlying profits in the same period have reportedly more than doubled at $6.2 billion (£4.9 billion).
A windfall tax on energy companies would mean a one-off tax on excess profits, which would be used to fund households hit the hardest by the cost-of-living crisis and soaring energy bills.
The concept was first introduced in the UK in 1997 under Tony Blair’s New Labour administration. In Europe, Spain and Italy have already announced plans for a windfall tax on major energy suppliers.
