UK slaps 25% windfall tax on profits of oil and gas companies

BORIS Johnson’s government will impose a so-called windfall tax on the profits of oil and gas companies to help fund at least £5 billion (S$8.7 billion) of support for Britons facing a cost-of-living crisis.

The tax will be “temporary” and “targeted”, Chancellor of the Exchequer Rishi Sunak said in the House of Commons on Thursday (May 26). 

Senior ministers in the British government have long opposed a special levy on energy firms because they fear it will stymie investment. It is especially sensitive now because it is a key policy of the main opposition Labour Party, and undermines the core Conservative claim to be the party of business.

But the pressure to intervene to ease a record squeeze on living standards has become intense, with a windfall tax increasingly popular among Britons. The Tories have trailed Labour in YouGov polling since December, while Sunak’s move also comes as the government tries to shift the narrative from the scandal surrounding illegal parties in Downing Street during the pandemic.

Sunak has been “dragged kicking and screaming to a U-turn”, Labour’s shadow chancellor Rachel Reeves said on Twitter. “Why has it taken so long?”

The need for cost-of-living support became more urgent this week when the UK’s energy regulator said Britons face another sharp jump in their power and gas bills just before the winter. The energy price cap is due to rise to a record £2,800 in October, a 42 per cent increase on average bills that is estimated to send 12 million households into so-called fuel poverty.

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The UK is on track to be the advanced nation worst hit by a combination of soaring inflation and weak growth, with prices expected to rise 13 per cent over this year and next, the most among the Group of Seven countries. BLOOMBERG