After weeks of refusing, London finally agreed to impose a tax on oil giants’ profits to fund billions of pounds in aid to the country, despite the skyrocketing cost of living.
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.
In Parliament, Rishi Sunak, Finance Minister, unveiled Thursday a 15-billion pound aid package to the most economically disadvantaged households. This was in response to inflation that reached 9% in April, its highest point in 40 years.
A statement by the UK Treasury states that “almost eight out of the UK’s most fragile households will receive at minimum PS1,200 this fiscal year.” This 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, which includes the 22 billion pounds in 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 amount can be reduced by 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 profit to take the appropriate action.
Thursday’s snarky comment by the Labor Opposition was a result of months of Boris Johnson’s Conservative government refusing to tax oil’majors. This is in response to the sector’s arguments.
Sam Nadel, Oxfam’s director of government relations, said that it was time for the initiative.
He added 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.”
