An emergency budget is necessary

A windfall tax on energy companies whose profits have soared would be a dramatic but justified step

With the looming risk of a historically bad recession and a return of the almost forgotten economic nightmare of “stagflation”, Boris Johnson was quite correct when he said “we cannot simply spend our way out of this problem”.

And he was also correct when he said that the solution was to foster economic growth by helping to create large numbers of high-wage and high-skill jobs.

However, the Prime Minister’s defence of the government’s plans, as laid out in the Queen’s Speech delivered by Prince Charles, missed the point.

According to some estimates, the energy price cap could be increased to £2,900 in October after a record rise in April from £1,277 to £1,971. And this increase could mean that up to 40 per cent of people in the UK find themselves in fuel poverty.

In those circumstances, the UK Government must find effective ways to protect people most at risk from such a staggering rise, particularly as winter sets in. And yesterday, it missed an opportunity to do so. But it also needs to safeguard the wider economy.

Leading businesspeople from some of Britain’s biggest companies have been sounding the alarm.

Tesco chairman John Allan spoke yesterday of an “overwhelming need” for a windfall tax on energy companies to help people pay their bills, warning customers were spending less. And his remarks came after Keith Anderson, chief executive of Scottishpower, said the government needed to have a plan in place by July to help people with their bills ahead of October’s rise. “The key thing here is urgency and speed,” he stressed.

If the government fails to take effective action to reduce the staggering cost of energy, it will be failing in its duty to protect its citizens.

And the knock-on effects as vast numbers of people cut back on spending could create the shock to the system that tips the country over the edge into economic disaster.

A windfall tax would be a dramatic step but, faced with such a prospect, a carefully considered levy on energy companies whose profits have soared as prices have risen is justified.

Johnson has said the government will have “more to say” on this issue. We hope it is to announce an emergency budget to address an emergency situation.