Chancellor Jeremy Hunt has announced a large hike in windfall taxes, raising the tax on energy giants’ profits from 25 percent to 35 percent until 2028 as the Treasury scrambles to shore up funds to shield households from surging costs of gas and electricity. Mr Hunt promised that the should not deter investment, one of the main reasons the previous cabinet had been reluctant to impose such a measure.
The Treasury chief also announced that electricity generators also will have to pay a new temporary levy of 45 percent. Together with the windfall tax, he said that the combined measures could raise as much as £14 billion next year.
Mr Hunt told the House of Commons as he unveiled the Autumn budget: “I have no objection to windfall taxes if they are genuinely about windfall profits caused by unexpected increases in energy prices.
“But any such tax should be temporary, not deter investment and recognise the cyclical nature of many energy businesses. Taking account of this, I have decided that from January 1st until March 2028 we will increase the Energy Profits Levy from 25 percent to 35 percent.”
Speaking on the windfall tax, he said: “The structure of our energy market also creates windfall profits for low-carbon electricity generation so, from January 1st, we have also decided to introduce a new, temporary 45 percent levy on electricity generators. Together these taxes raise £14billion next year.”
This comes after campaigners had long called for Mr Hunt to slap down a tax on the staggering profits raked in by energy giants, which left millions of Britons footing bigger bills amid the energy crisis.
Prior to Mr Hunt’s announcement, Alexander Kirk, Campaigner, Global Witness, said: “We are counting on the chancellor to go out of his way to assist the neediest. The £31 billion in excess profits made by Shell would be a bitter pill to take for many if a proper windfall tax is not implemented. Such a tax should close all tax loopholes and not safeguard companies like Shell
“In order to prevent situations like the one in Orkney, where residents who live next to a wind farm continue to pay through the nose for their electricity, the government must take bold action now to address the energy crisis, unlock our potential for wind and wave energy, and reimagine how our energy markets work. Britain also needs a national home insulation.” scheme to support people in the future.”
Alice Harrison, fossil Fuels Campaign Leader at Global Witness, added: “As the Chancellor battles with how to support people through a painful economic crisis, he needn’t look far for a huge pot of money – the extraordinary and eyewatering profits that the likes of BP and Shell have been enjoying over the past 12 months. This is a crisis caused by a dependency on fossil fuels and has benefitted those very companies to the tune of billions.”
Former Prime Minister Liz Truss, who holds the record for being the country’s shortest-ever serving leader, had previously argued against a windfall tax, calling it “a Labour idea and all about bashing business and it sends the wrong message to international investors and to the public”.
But her Government later U-turned on the policy after the Business announced it would step in with a “cost-plus revenue limit” for renewable and nuclear electricity generators in England and Wales.
Under this measure, there is a limit to how much the generators can make, “allowing generators to cover their costs, plus receive an appropriate revenue”.
Ed Miliband, the shadow climate and net zero secretary, said: “The government has finally accepted the principle of Labour’s call for a windfall tax on excess profits of electricity generators. After months of telling the country they were utterly opposed to the principle of a windfall tax, they have been dragged kicking and screaming to implement it.”
Despite Mr Hunt’s windfall tax measure being able to shore up extra funds for the Treasury, the Chancellor still announced that Ms Truss’ energy price guarantee scheme will increase the £2,500 price cap for typical households from £3,000 for 12 months from April.
This is a breaking story. More to follow.