Prime Minister Rishi Sunak is expected to bow to the pressure of a wind tax on energy companies as he lays out the government’s latest plan to tackle the latter’s cost of living crisis.
While not confirmed, Treasury sources also did not deny reports that he would rescind his claim to repay the £200 discount on energy bills, and possibly increase the subsidy.
Details are expected to be revealed on the Commons in the morning and are expected to target those who are suffering the most.
The announcement was made one day later Sue Gray’s much-anticipated report about Downing Street lockdown parties were announced, prompting critics to accuse the government of introducing measures to distract from the blast.
The imposition of taxes on oil and gas companies, which have benefited from rising global prices, is expected to finance these measures.
Options discussed include increasing discounts on warm homes to help low-income households cope with rising energy bills.
Other measures discussed include increasing the winter fuel subsidy, further cutting council tax or cutting VAT.
Calls for help for the most vulnerable were extended this week after it was announced that energy price caps are book for an extra £830 to £2,800 in October.
On Wednesday afternoon, a Treasury spokesman said: “We understand that people are struggling with rising prices which is why we have provided £22 billion in support to now.
“The Prime Minister has been clear that as the situation progresses, so will our response, with the most vulnerable being his number one priority.”
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Should oil tax be taxed?
Labor has called for tariffs on the oil and gas giants over the past few months but the government has so far resisted those calls.
Mr Sunak told the Commons last week that the government “does not believe that a wind tax is a simple and easy answer to all problems”.
“However, we are pragmatic and we would like to see our energy companies, which have generated extraordinary profits at a time of high prices, reinvest those profits in UK jobs, growth and energy security,” he added.
“I’ve made it clear and over and over that, if it doesn’t happen soon and on a substantial scale, neither option is worth discussing.”
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Why expensive energy affects everything
Offshore Energies UK, which represents the offshore oil and gas industry, warned the levy would mean higher prices and cause lasting damage to the industry.
Deirdre Michie, its chief executive, said: “This is an industry that thinks and plans long-term, so sudden new costs, like this proposed tax, will disrupt planning and investment. investment and, above all, undermining investor confidence.”
Ms Michie said the industry was taxed the most in the UK, paying 40% of profits overseas and operators would send the Treasury £7.8bn this financial year.
She says that equates to £279 a household and the loss of tax revenue will mean output will fall in the coming years.
Ms. Michie said the industry was “really proud to pay our taxes”, but warned “the problem is when new taxes are introduced suddenly and without consultation”.
