London voted on Thursday to tax the profits of oil companies to fund billions of pounds worth of aid to the country in response to the rising cost of living. These announcements follow a report that found multiple watered parties in Downing Street. This further weakens Prime Minister Boris Johnson.
Rishi Sunak, Finance Minister, presented Thursday in Parliament a 15 billion pound package of aid for the most economically disadvantaged households. This was in response to inflation which is at 9% per year, its highest level in 40 years.
According to a Yougov poll, one in five Britons says they are unable to make ends meet. The escalating food and energy costs, which have been exacerbated by the Russian invasion in Ukraine, will likely worsen in October, when the UK’s cap on energy prices is set to be increased sharply.
Rishi Sunak stated in Westminster that these measures would make the most modest Britons feel the “weight (of inflation) easing”.
A statement by the UK Treasury states that “almost eight out of eight of the UK’s most vulnerable households will be receiving at least PS1,200 in this year’s budget, which includes a PS650 cost-of-living payment, an increase in the minimum (Universal Credit), 400 pounds, and a doubling the reduction in energy bills.”
The Treasury notes that the total aid to “low-income households” for the cost of living is 37 billion pounds, with 22 billion pounds worth of measures already announced.
These measures will be funded by a temporary 25% tax on energy profits of oil and gas companies. This is to reflect their extraordinary profits since the beginning of the conflict in Ukraine.
According to the Treasury, it should raise 5 billion pounds. However, the Treasury specifies that the Treasury could reduce the amount due to a “super-reduction” if energy giants invest in new energy sources. The Treasury explains that companies will receive 91 pence (tax credit), for each pound they invest.
Contrary to recent media reports, the exceptional tax is not currently applicable to energy companies. However, the government “is in consultation” with the sector and will urgently evaluate the extent of their extraordinary profits in order to take the appropriate action.
Thursday’s remark by the Labor Opposition was a mockery of the apparent change of heart. This comes after months of Boris Johnson’s Conservative government refusing to tax oil’majors. It is fearful of disincentive investment in the transition towards carbon neutrality.
Sam Nadel, Oxfam’s director of government relations, said that it was time. He said that the energy price crisis was a stark reminder of our dependence on fossil fuels. We need to increase our energy security and invest in renewable energy resources that are cheap, reliable, and clean.
The tax on profits from hydrocarbon giants is too low for Greenpeace. It should have been 70%. This would have provided “not only short-term assistance but also housing improvements to ensure they use and waste less energy and keep their bills lower over the years.”
Michael Hewson, CMC Markets analyst, laments “a crumbling policy in energy that changes direction more frequently than the wind.”
The government now calls on the oil and natural gas sector to invest “to support the UK’s economy, jobs, and energy security”, but he points out that “this wasn’t the case a Year ago, otherwise investments in Cambo and Jackdaw North Sea (oil projects), would have been approved.”
