Sunak previously described the idea of a windfall tax on oil and gas majors as “superficially appealing” but a decision that would ultimately deter investment.
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LONDON — U.K. Finance Minister Rishi Sunak has imposed a windfall tax on oil and gas majors as the government scrambles to alleviate the country’s worsening cost-of-living crisis.
The measures come a day after a deeply embarrassing investigation into lockdown parties at Downing Street and amid sustained pressure on the ruling Conservative government to do more as soaring inflation pushes up the price of everything from food to fuel.
“The oil and gas sector is making extraordinary profits not as the result of recent changes to risk-taking or innovation or efficiency but as the result of surging global commodity prices driven in part by Russia’s war,” Sunak told lawmakers in the House of Commons on Thursday.
“And for that reason, I am sympathetic to the argument to tax those profits fairly,” Sunak said, prompting jeers from opposition lawmakers.
Sunak said the government is imposing a temporary targeted energy profits levy with a so-called “investment allowance” to incentivize oil and gas firms to re-invest their profits. The new levy will be charged on the profits of oil and gas companies at a rate of 25%.
The decision to impose a windfall tax on energy companies marks yet another U-turn for Prime Minister Boris Johnson’s government. Sunak had previously rejected the one-off levy, saying that while it sounded “superficially appealing” it would ultimately deter investment.
Opposition lawmakers have repeatedly called on the government to impose a one-off tax on energy majors, saying the move would help to fund a national package of support for households.
Britain’s oil and gas giants BP and Shell reported massive quarterly profits earlier this month, as they benefited from surging commodity prices during Russia’s onslaught in Ukraine. It has fueled calls for the government to tax their surplus cash.
Britain’s oil and gas giants BP and Shell reported huge quarterly profits earlier this month.
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Rachel Reeves, shadow finance minister for the opposition Labour Party, welcomed Sunak’s change of heart over the policy following months of government opposition.
“It seems the Chancellor is finally being dragged kicking & screaming to a U turn, and four months late adopting Labour’s call for a windfall tax on oil & gas producer profits,” Reeves said via Twitter on Thursday morning.
“Why has it taken so long? Why have families had to struggle and worry while he dragged his feet?”
‘Nightmare scenario’
Sunak said soaring inflation is causing “acute distress,” with the economic situation becoming more serious over the course of this year.
U.K. inflation jumped to 9% last month as food and energy prices spiraled, reaching its highest annual rate in 40 years. The Bank of England expects inflation to rise above 10% later this…
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