The chancellor is preparing to impose a windfall tax on electricity firms within weeks despite provoking a furious backlash from business yesterday by launching a £5 billion raid on North Sea oil and gas producers.
Rishi Sunak yesterday abandoned months of opposition to a windfall tax by announcing a new 25 per cent levy on the “extraordinary profits” that oil and gas companies are making after prices surged, partly driven by Russia’s invasion of Ukraine.
Defending the U-turn to fund relief for consumers facing record energy bills, Sunak declared: “We all make mistakes and being able to change course is not a weakness, it is a strength.”
The chancellor threatened to extend the levy to power-plant owners, saying that “certain parts of the electricity-generation sector are also making extraordinary profits” and that he was “urgently evaluating” the scale of these profits, and the steps to take, following moves by other European countries to tax power companies.
The Times understands that Sunak intends to announce plans to tax electricity generators within the next month. “It’s called the energy profits levy for a reason,” a government source said. “It’s a broad tax, we want to move sooner rather than later.” The tax on electricity generators would raise in the region of “the low digit billions”.
The new energy profits levy will immediately increase the total tax rate that oil and gas companies pay to 65 per cent, from 40 per cent at present — going even further than Labour’s proposal of a 10 percentage point increase. The Treasury said it was expected to raise £5 billion in the first 12 months and that rather than a one-off levy, the measure will remain until “oil and gas prices return to historically more normal levels”, or by the end of 2025.
The government had rejected Labour’s plan on the basis that it would deter investment but Sunak insisted that the new levy would “encourage investment, not deter it” because of a system of tax relief that meant that “the more a company invests, the less tax they will pay”.
However, Deirdre Michie, chief executive of Offshore Energies, the North Sea lobby group, claimed that the new tax would “drive away investors and so reduce UK energy production”.
“In just a few years, the UK will be even more reliant on other countries for its energy, and consumers will still face rising bills,” she claimed, warning that “a flood of investment formerly earmarked for UK energy projects” could now be diverted overseas, making it harder for Britain to hit its net zero goals. About 200,000 people working in the oil and gas industry were now “facing a less secure future”, she said.

SAS Volunteer

We publish content from 3rd party sources for educational purposes. We operate as a not-for-profit and do not make any revenue from the website. If you have content published on this site that you feel infringes your copyright please contact: to have the appropriate credit provided or the offending article removed.


Leave a Reply

Avatar placeholder

Your email address will not be published. Required fields are marked *