One of the government’s most loyal ministers has warned that a windfall tax on oil and gas companies will not be “economically free”.
The tax was announced by Chancellor Rishi Sunak part of a £21billion support package to help people cope with the rising cost of living.
But Jacob Rees-Moggthe minister for Brexit opportunities and government efficiency, told Sky News that any taxation has an economic consequence.
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He said: “People need to understand that there is no tax you can take that is economically free.
“No matter what tax it is, it will have an economic consequence.
“Whether it is a soft tax or an excess profits tax, there is an economic consequence.
“There is no free tax honeypot that governments can just step into.
“So as long as they raise the tax, knowing that it will have an economic consequence, which the Chancellor is doing, then it is a choice between one form of revenue collection and another.
“There is no non-tax way, ultimately, to spend. It’s either tax today or tax tomorrow by borrowing.”
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Mr Sunakthe tax on oil and gas companies also faced CBI reviews – who suggested the tax could discourage investment – as well as Tory backbenchers, where MP Richard Drax accused the Chancellor of ‘throwing red meat at socialists’.
The tax is not just one-time, as it will only be removed “if oil and gas prices return to historically high levels” and could be in place until the end of December 2025 – when a “clause timeout” will end the tax. .
The measures announced by the Chancellor in the Commons on Thursday included a one-time payment of £650 to low-income households on benefits, paid in two installments in July and autumn at a cost of £5.4billion.
Pensioners will also receive a £300 payment in November/December alongside winter fuel payments in a move costing £2.5billion, while £150 will be paid out by September to those receiving disability benefits .
Mr Sunak announced that £5bn of the package would be paid for by the oil and gas giants’ profit levy, and around £10bn would be covered by additional borrowing.
The Chancellor has tried to avoid calling his 25 per cent energy profit levy plan a ‘windfall profit tax’ as he has been accused by Labor of being ‘kicked and kicked’ cries” in a U-turn on the policy the opposition has spent months calling for.
But Simon Clarke, Chief Secretary to the Treasury, acknowledged it was an exceptional tax, although one he said included a ‘carefully calibrated bid’ because of its tax incentives for companies to invest in the production of oil and gas in the North Sea.
When announcing his tax package in the Commons, Mr Sunak told MPs it was worth £15billion.
But officials later acknowledged the announcement had a hidden cost of £6billion, bringing it to £21billion.
Indeed, over the next five years, the original £200 rebate on energy bills, announced in February, doubled and turned into a grant by the Chancellor on Thursday, will no longer be repaid by consumers as originally planned.
Mr Sunak’s announcement came a day after senior civil servant Sue Gray damning report into lockdown parties in Downing Street, laying bare details of drunken parties, fights and karaoke at the heart of government at a time when COVID-19 restrictions were in place.
In an interview with Martin Lewis, founder of the Money Saving Expert website, the Chancellor was asked if the tax measures were quickly unveiled to act as a ‘fig leaf’ after Ms Gray’s report.
He replied, “I can categorically assure you that it had no bearing on when we announced this support, and I can give you my absolute assurance on this and my word.”
Rishi Sunak will speak to Sky News about his £21billion assistance package just after 7am this morning
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