Rishi Sunak threatens energy firms with windfall tax

The chancellor has threatened to hit energy companies with a one-off “windfall” tax if they don’t invest enough in new projects.

Rishi Sunak added that he wanted to see investment “soon” to boost energy security, and “no options are off the table” if not.

Opposition parties want to tax oil and gas firms’ soaring profits to help households grappling with rising bills.

Treasury officials have been ordered to examine a potential tax, a source said.

In an interview with the BBC, Mr Sunak said he was not “naturally attracted” to the idea of a windfall tax, but he was “pragmatic” about introducing one.

Speaking to LBC radio, Prime Minister Boris Johnson said the government would “have to look” at the proposal if not enough investment was made.

And Business Secretary Kwasi Kwarteng told the BBC that, although he felt taxes were “a disincentive to investment”, given the “unprecedented situation” in Ukraine and rising prices, “nothing should be taken off the table”.

Energy firms have been posting huge profits this year, amid soaring prices for gas and oil as economies restart after Covid lockdowns.

Labour, the Lib Dems and the SNP are all calling for a windfall tax on their profits to pay for tax cuts and benefit boosts, to help households cope with rising living costs caused by spiralling inflation.

The government has argued such a tax could deter the investment it wants to see in new energy infrastructure – but has not ruled one out.

Labour’s shadow climate climate change secretary Ed Miliband said the Tories had opposed a windfall tax “at every turn”.

“Now, as their excuses are wearing thin, we hear that they are finally considering it. But how much more time does this government need to make up its mind, whilst the British people suffer?” he added.

“The truth is that the Conservatives are turning to Labour’s solutions because they cannot provide the answers to the cost of living crisis.”

Asked by BBC economics editor Faisal Islam about the prospect of windfall taxes, Mr Sunak said: “I’m not naturally attracted to the idea of them.

“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.

“And if that doesn’t happen, then no options are off the table.”

Downing Street told reporters on Thursday there was “further to go” on investment – but did not put a timeframe on when it wanted to see this.

Mr Sunak’s comments mark a change of tone on the idea of a windfall tax that has been pushed by the opposition.

The chancellor has previously said it’s not a good idea, and reiterated that he’s not attracted to such a policy.

But he also stressed that there were elevated profits being made right now by the energy companies this time of high prices.

It doesn’t guarantee that we’ll get a windfall tax – but certainly means that the energy companies have to think very carefully about their next move.

Conservative MP Robert Halfon branded the bosses of big oil companies “the new oligarchs,” and accused firms of “ripping off motorists at the pump” by not reducing prices quickly when international prices fall.

Backing the idea of a windfall tax, he told the BBC: “Margaret Thatcher did it, David Cameron has done it, Conservative governments have imposed windfall tax on oil companies in times of need.”

Shell and BP both announced a surge in underlying profits recently, despite both companies taking a hit after pulling out of Russian oil and gas.

BP boss Bernard Looney has told journalists that his company would proceed with all of their UK investments with or without a windfall tax.

Shell boss Ben van Beurden wouldn’t be drawn on whether his firm would scale back investment if a windfall tax was imposed on it.

In his BBC interview, Mr Sunak said he did not think windfall taxes “can never be the answer”, nor “an easy, quick simple answer to solve every problem”.

“I’m not in either of those schools of thought. I’m pragmatic about it,” he added.

Speaking on LBC, Mr Johnson said he “didn’t like” the idea of a windfall tax because of the potential to deter investment.

When it was put to him that some energy bosses say it would not stop them investing, the prime minister said: “Well then, you know, we’ll have to look at it”.

“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”.

Liberal Democrat leader Sir Ed Davey accused Mr Sunak and Mr Johnson of sending “mixed signals” on the prospect of a windfall tax, adding it was a “sign of a government in chaos”.

“People want to see decisive action now to help them with soaring energy bills,” he said.

“Instead we have day after day of contradictory statements, while energy companies rake in record profits and families can’t afford to put food on the table”.