Chancellor Rishi Sunak is expected to bow to pressure to impose a windfall tax on energy companies when he outlines the government’s latest plan to tackle the cost of living crisis later.
Although unconfirmed, Treasury sources have also not denied reports that it will remove the requirement to repay the £200 rebate on energy bills and may increase the level of the grant.
Details are expected to be revealed in the Commons in the morning and are expected to target those who are suffering the most.
The announcement comes a day later Sue Gray’s long-awaited report on the lockdown-breaking parties in Downing Street has been published, prompting critics to accuse the government of coming up with the measures to distract from the fallout.
A windfall tax on oil and gas companies, which have benefited from higher world prices, should largely finance the measures.
Options that have been discussed include a further increase in the warm house rebate to help low-income households cope with rising energy bills.
Other measures discussed include an increase in the winter fuel allowance, a further reduction in council tax or a reduction in VAT.
Calls for help for the most vulnerable were renewed this week after energy price caps were announced expected to increase by a further £830 to £2,800 in October.
On Wednesday afternoon, a Treasury spokeswoman said: “We understand that people are struggling with rising prices, which is why we have provided £22billion of support to date.
“The Chancellor has been clear that as the situation evolves, our response will evolve too, with the most vulnerable being her number one priority.”
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Labor has been calling for a windfall tax on oil and gas giants for some months, but the government has so far resisted those calls.
Mr Sunak told the Commons last week that the Government ‘does not believe that windfall taxes are the simple and easy answer to all problems’.
“However, we are pragmatic and want to see our energy companies, which have made extraordinary profits at a time of extremely high prices, reinvest those profits into UK jobs, growth and energy security,” he added. .
“I have made it clear and said repeatedly that unless this happens quickly and on a large scale, no options are on the table.”
Offshore Energies UK, which represents the offshore oil and gas industry, warned that a windfall tax would drive higher prices and cause long-term damage to the industry.
Deirdre Michie, its managing director, said: “This is an industry that thinks and plans for the long term, so sudden new costs, like this proposed tax, will disrupt planning and investment and, above all, undermine consumer confidence. investors.”
Ms Michie said the industry is already the highest taxed in the UK, paying 40% on offshore profits, and operators would send £7.8billion to the Treasury this financial year.
She said that equated to £279 per household and a windfall tax would mean lower production in years to come.
Ms Michie said the industry is “in fact very proud to pay our taxes”, but warned that “the problem is when new taxes are imposed suddenly and without consultation”.
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