Chancellor ‘pragmatic’ about idea of introducing windfall tax
Rishi Sunak has said he is “pragmatic” about the idea of introducing a windfall tax as the Prime Minister refused to rule out targeting energy companies to help ease the cost-ofliving crisis.
The Chancellor has reportedly told Treasury officials to examine plans for a levy on the soaring profits of oil and gas giants as financial pressures continue to take a toll on people across the country.
It comes as Britain’s economy shrank unexpectedly in March as official figures revealed a pull back in consumer spending amid mounting fears that the cost-of-living crisis may plunge the UK into recession.
Speaking tot hebbc on thursday, Mr Sunak said he was not “naturally attracted” to wind fall taxes, but he was “pragmatic” about the idea.
“I find there are two camps of people, actually: there’s some people who think windfall taxes can never be the answer, and then there are other people who think wind fall taxes are an easy, quick, simple answer to solve every problem,” he said.
“I’m not in either of those schools of thought – I’m pragmatic about it. As I said, I’m not naturally attracted to the idea of them.
“But what I do know is that 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. If that doesn’t happen, then no options are off the table.”
Earlier the prime minister said while he still does not like such taxes because of the impact on investment, it is something that would have to be considered.
It follows an admission by BP chief executive bernard looney that his firm’s investment plans would not be affected by a wind fall tax.
Pressed on Mr Looney’s comments, Mr Johnson said: “Well, you know, then we’ll have to look at it.”
However, the PM added: “The disadvantage with those sorts of taxes is that they deter investment in the very things that they need to be investing in – new technology, in new energy supply.
“I don’ t like them. id idn’ t think they’re the right thing. I don’t think they’re the right way forward.”
Mr Johnson refused to be drawn on what further action the Government might take to address the cost-of-living crisis when asked about the matter following a Cabinet away day in Staffordshire yesterday.
Asked what more he thinks needs to be done, he said: “In July, for instance, what’ s already happening is that … there is going to be the tax cut for everybody,or 70 percent of people, on national insurance, that’ s probably worth about £330.
“You’ve already seen the cuts in council tax. we will do things to help people in the short term, of course. And I’m not going to anticipate anything more that we may do.”
Former Tory minister David G auk es aid earlier he suspected the Government would end up taxing the profits of oil and gas companies to ease the cost-ofliving crisis.
He told BBC Radio 4: “It’s not ideal. I don’t think it’s an easy or straightforward answer. I can understand why the treasury is reluctant to go down this route when we do want to encourage investment, particularly in the energy sector, as we move away from relying on hydrocarbons.
“I suspect, in the end, the political case for it, the way in which one can raise really quite substantial sums of money, and if you can try to deliver this in a way that makes it clear that the Government is not going to come back again and again, then it might not have that much of a behavioural impact.”
The debate around windfall taxes comes as the Office for National Statistics (ONS) said gross domestic product (GDP) fell by 0.1 per cent month on month in March after growth stalled in February – revised down from the 0.1 per cent previous growth estimate.
Experts had expected growth to remain flat in March.
The data shows the impact of soaring inflation on consumer spending, with retail particularly hard hit.
The ONS said the economy grew at its slowest pace for a year in the first quarter overall, with growth of 0.8 per cent, down from 1.3 per cent in the previous three months.
While the expansion means GDP is now 0.7 per cent above levels seen before the pandemic struck, the figures mark the calm before the storm as warnings grow over a recession in the UK due to the cost-of-living crisis.
The National Institute of Economic and Social Research think-tank predicted on Wednesday the UK would fall into recession, forecasting a GDP contraction in the third and fourth quarters.
Calls are growing for an emergency budget to address the cost-of-living crisis, despite the Government having dismissed the need for further urgent action.
Rain Newton-smith, chief economist at thecbi,s aid :“the economy barely kept its head above the water during a volatile start to the year, but times look set to get that bit tougher. Cost pressure sand rising prices have tightened their grip, with both businesses and households feeling the pinch. The end result is a weaker economic outlook.
“It’ s clear that the most vulnerable households and energy intensive businesses may need further support.”
The Bank of England raised interestrates to a 13-year high of 1 percent last week to try to curb inflation, and warned theset to st all in the second quarter, before contracting in the final three months and going into reverse overall in 2023.