Chancellor Rishi Sunak has warned energy companies that they could be hit with a one-off windfall tax on their profits if they fail to invest enough money into new projects aimed at driving innovation forward.
Opposition parties have been calling for such a tax on oil and gas firms to help households with rising costs. These energy firms are posting record profits as energy and fuel bills rise amid the cost-of-living crisis.
The government has stopped short of introducing such a measure amid concerns that it could deter investment, but the chancellor has now said that he wants to see funds invested “soon” into projects that would bolster the UK’s energy security.
Should energy firms not invest sufficient money into such initiatives, Sunak said that “no options are off the table” and he was “pragmatic” about bringing in a windfall tax even if not “naturally attracted” to the idea.
Sunak told the BBC: “I am not naturally attracted to the idea of them [windfall taxes]. But what I do know is these companies are making a significant amount of profit at the moment because of these very elevated prices.
“What I want to see is significant investment back into the UK economy to support jobs, to support energy security, and I want to see that investment soon. If that doesn't happen, then no options are off the table.”
Prime minister Boris Johnson separately said in an interview with LBC that the government would “have to look” at the option of a windfall tax if firms simply sit on their profits and do not invest enough.
BP chief Bernard Looney has said that the firm is looking to proceed with all its UK investment plans whether a windfall tax is introduced or not, and Shell’s boss Ben van Beurden has not suggested that his company would scale back investment if its profits were taxed.
When pressed over such comments suggesting that the tax would not stop fuel giants from making investments, Johnson said: “We’ll have to look at it [going ahead with the tax]. What I'm saying is, I want them to make those investments - that's the most important thing.
“They've got to be making investments in new energy supply for our country”.
Tory MP Robert Halfon has spoken out in support of the measure, saying: “Margaret Thatcher did it, David Cameron has done it, Conservative governments have imposed windfall tax on oil companies in times of need.”
Labour shadow climate change secretary Ed Miliband took aim at the Conservatives in the face of their apparent change of heart, saying that they were “turning to Labour’s solutions because they cannot provide the answers to the cost-of-living crisis” themselves.
He said: “Now, as their excuses are wearing thin, we hear that they are finally considering it [a windfall tax]. But how much more time does this government need to make up its mind, whilst the British people suffer?”
The government has not yet put a firm timeframe on when it would like to see firms diverting funds toward future energy projects before it would hit offenders with a possible tax penalty.
Image taken from Wikimedia Commons