Chancellor Rishi Sunak has announced a 25 per cent temporary levy on the profits of oil and gas firms, which will fund a package to help households deal with rising energy bills.
Sunak said that the government had recognised that the British public “were worried” amid rising food, fuel and energy prices, and that now was the time to intervene as inflation hit a 40-year peak.
The idea of a windfall tax had been mooted by opposition parties since the Liberal Democrats first suggested it in November, with Labour drawing up its own blueprint of what such a levy could look like back in January.
However, the government had dismissed the idea until now, citing fears that it could deter investment.
But Sunak informed the Commons when announcing the measure that it would both “tax extraordinary profits fairly and incentivise investments”, as well as providing “significant support to the British people”.
He said: “This government will never stop trying to help people, to fix problems where we can, to do what is right - as we did during the pandemic.”
The chancellor added that the “temporary targeted energy profits levy” of 25 per cent on profits formed a “sensible middle ground” and also included a new investment allowance for businesses, so that 90 per cent can be earned back in tax relief for every pound a firm invests.
Sunak explained: “For every pound a company invests they will get back 90 per cent in tax relief - the more the company invests the less tax they will pay.
“We should not be ideological about this; we should be pragmatic. It is possible to both tax extraordinary profits fairly and incentivise investments.”
The chancellor confirmed that the levy would be lifted once energy prices return to normal levels.
The levy will fund a package of measures which will see the £200 loan for energy bills scrapped, replaced by a £400 grant to every household that will not need to be repaid. Eight million households receiving the lowest incomes will also be provided with a one-off payment of £650.
From the autumn, eight million pensioner households will be given an additional £300 to help pay for bills during the colder months, and a one-off disability cost-of-living payment of £150 will also be given to eligible households.
The chancellor said that the new £15 billion package of measures took the total value of government support offered to households this year up to £37 billion.
However, Downing Street has been forced to deny claims from opposition MPs that the timing of the announcement was deliberately left until Thursday this week as a diversionary tactic, after Sue Gray’s full report into Partygate was unveiled on Wednesday.
Labour shadow chancellor Rachel Reeves, while welcoming the new measures, stressed that they had been months in the making and the government’s “dither and delay” had proven costly for the nation.
Reeves said: “Let there be no doubt about who is winning the battle of ideas in Britain, it is the Labour party. Today it feels like the chancellor has finally realised the problems the country is facing.
“Dither and delay have cost our country dearly.”
Image taken from Wikimedia Commons
