Rishi looks at ‘windfall tax lite’

Energy giants would face penalty — but pay less if they invest in Britain

CHANCELLOR Rishi Sunak has drawn up compromise plans for a levy on energy giants amid continued wrangling among ministers over a windfall tax.

Whitehall sources confirmed last night that he is examining proposals for a ‘graduated’ levy on the big oil and gas firms, which would see those that fail to invest in improving energy capacity in this country face higher taxes.

Senior ministers continued to lobby publicly against the idea of a windfall tax yesterday. Education Secretary Nadhim Zahawi warned it could hit the company dividends relied on by pension funds. But both the Chancellor and Boris Johnson have left the door open to the idea, which public polling suggests would be a popular way of raising money to help tackle the cost of living crisis.

The Prime Minister and Chancellor held private talks on the issue last week, but have not yet reached a decision.

The Treasury has drawn up proposals for a straightforward windfall tax, which would hit the big oil and gas companies with a higher rate of corporation tax on their profits for a year, to reflect the huge gains they have made from soaring energy prices.

But officials are also examining plans for a more sophisticated scheme, which would see firms face higher taxes only if they fail to invest their excess profits in building facilities.

One source described the idea, dubbed a ‘windfall tax lite’, as a ‘more pro-investment’ option.

Some ministers and senior No 10 officials argue that any such tax would be ‘un-Conservative’ and would in fact risk damaging investment.

Health Secretary Sajid Javid told the Tories’ Welsh conference at the weekend that he was ‘instinctively’ opposed to the idea, and Northern Ireland Secretary Brandon Lewis said he was ‘very, very wary’ of it. Trade Secretary Anne-Marie Trevelyan described a windfall tax as a ‘very short-term measure’.

Mr Zahawi yesterday refused to rule out a windfall tax, saying the Government was ‘considering all the options’ to tackle the cost of living crisis.

But he told Sky News: ‘If you apply a windfall tax, [companies] will probably have to reduce or take away their dividend. Who receives the dividend? Pensioners through their pension funds.

‘Investment has to be real, which is what I think Rishi will demand of all these companies and to see a roadmap towards that investment. We’re not taking any options off the table.’

The wrangling came as the Centre for Policy Studies warned that Britain is becoming a ‘less attractive’ place to do business.

In a report published today following interviews with 100 major investors and business leaders, the centre-Right think tank found a big rise in corporation tax, coupled with a lack of focus on the needs of firms investing in the UK, could see Britain lose out to rivals such as France.

Meanwhile the Tories claimed that Labour’s spending plans would leave a £90billion black hole in the public finances.

Chief Secretary to the Treasury Simon Clarke said last night that the Opposition had made almost £100billion of spending commitments, but had only explained how less than £10billion of it would be funded.

He said it would almost double Britain’s current level of borrowing and would lead to the fourth biggest deficit in peacetime. ‘This is the same old Labour, spending taxpayers’ money with no plan to pay for it,’ he added.

Labour said: ‘We respect every penny of taxpayers’ money.’

‘Very short-term measure’

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