Tax revenue expands again

THE government will be a big winner from the sky high oil and gas prices. The profits of the UK producers will be swollen.

The UK charges a windfall rate of Corporation tax on these profits at twice the normal rate.

Then there is the big surge in petrol and diesel prices. Over half the pump price is tax, so that will be another big win for the Treasury.

With General inflation heading for 7% all those items that attract VAT will also be chipping in more tax.

If the government gets around to substituting UK gas for Russian and Qatari imports that will also be a big boost to the receipts.

Indeed if you added all these up you would probably be close to another £12bn of tax raids on voters, enough to cancel the National Insurance rise.

The Chancellor must change his mind on the big tax raid in April when real incomes will be badly hit by energy prices. He is more than £50bn better off than budget this year already, and now has the further windfall.

He should accept he is overtaxing and start to do something to cut the burdens. Otherwise he will go down in history as architect of one of the worst hits real incomes we have seen.

We need more gas

The Business Secretary needs to think again. Industry runs on gas. You need lots of gas to make steel, fertiliser, ceramics, cement, bricks, tiles and many other materials and products.

In due course there will be ways of using more electricity from renewable sources, but today’s factories run on gas. UK factories face heavy losses and closure at current gas prices, made higher by the UK’s high carbon tax surcharge. He should come up with action to ease the squeeze on industry.

He should also understand that plenty of gas trades at contract prices, not at current spot global market prices. US gas prices are much lower than current UK prices thanks to policies that have promoted domestic gas production. Most of the US gas has to be sold to domestic users, delivered by pipe.

The US lacks capacity to convert it all to LNG and export it in tankers, so domestic demand is the main determinant of prices.

He also needs to refresh his memory that increasing the supply of something does lower prices if other things stay the same.

The UK needs to produce all the gas it can to help Europe cut its dependence on Russian gas. The UK should buy no Russian gas itself, and should also stop buying imported LNG from elsewhere as soon as we are producing the gas we need.

Delivering it by pipe to ourselves is cheaper and produces much less CO2 than bringing it in on ship after compression.