Jacob Rees-Mogg shares concerns on impact of windfall-tax
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There has been increasing demand for the introduction of a windfall tax on energy companies including BP and Shell as Britons are hit with soaring oil and gas prices. Earlier this month, energy giant Shell reported its highest ever quarterly profits, making made $9.13billion (£7.3billion) in the first three months of the year.
BP also reported a sharp rise in profits as the global cost of gas and oil spiked, but the UK Government has so far ruled out a windfall tax.
A windfall tax is a one-off tax enforced when a company in the private sector makes a large profit on something they’re not responsible for – in this case, the profits made as a direct result of selling oil and gas at record prices, which is, in turn, driving up the cost of living and leaving millions in financial peril.
The Labour Party called for the UK to follow Spain and Italy in implementing the tax on energy companies.
Mr Sunak’s latest indication that he might impose it has caused a clash with Energy Secretary Kwasi Kwarteng.
Mr Kwarteng criticised the proposal and called the windfall tax a “bad idea”.
He said: “I don’t believe in windfall taxes because what you are taxing is investment in jobs, you are taxing investment in wealth creation, you’re taxing investment in new technologies such as hydrogen and carbon capture.
“We want to see more investment. We don’t want to see taxes which essentially act against any incentive to invest.”
Labour will call for a vote today, Tuesday, May 17, to create pressure for a windfall tax to be introduced and Conservative MPs will be ordered to vote against this.
Shadow Minister Ed Miliband told Sky News: “We face a social emergency in this country. Seven million people, we know, are skipping meals because they can’t afford their bills, and energy bills are rocketing upwards.
“At the same time, as a direct result of that, we have got oil and gas companies that are making billions of pounds, literally record profits.
“My message to the Chancellor is this – you’re going to do a windfall tax. I believe he is going to do a windfall tax because, frankly, it’s an unanswerable case. Get on with it and do it, and bring real help to families.”
Conservative chair of the Treasury Committee Mel Stride said that while he would normally be opposed to the idea, the current “extraordinary circumstances” meant there was a case for looking at “a one-off windfall tax”.
He said that energy companies had made “super-normal profits” and some of the money should be “channelled to those who are really struggling”.
The BBC reports that a Treasury source said the option of a windfall tax was “not off the table”.
A Treasury Source told the BBC that Mr Sunak remained open-minded about the idea and still held the same position as earlier in the week.
Mr Sunak said the idea of a windfall tax was not his preferred option but he was “pragmatic” about introducing one.
Prime Minister Boris Johnson told LBC radio last week that the Government would “have to look” at the proposal if not enough investment was made.
Governor of the Bank of England Andrew Bailey warned on Monday that there is a “very real income shock” coming from energy prices and “apocalyptic” food prices.
Mr Bailey said he felt “helpless” as he defended the Bank’s monetary policy.
He told MPs at the Treasury Select Committee that UK consumer demands will be impacted by inflation, which is the highest in 30 years, and that this is expected to cause higher unemployment.
The Office for National Statistics recorded inflation at seven percent in March and is expected to reach more than eight percent inflation for the last month.
The Bank of England has said inflation is likely to peak at 10.25 percent during the final quarter of 2022.
Mr Bailey said: “The main driver of inflation and what brings it down is the very big, real income shock which is coming from outside forces and, particularly, energy prices and global goods prices.
“That will have an impact on domestic demand and it will dampen activity, and I’m afraid it looks like it will increase unemployment.”
So what do YOU think? Should Rishi Sunak raise money through an oil and gas windfall tax? Vote in our poll and join the debate in the comment section below.
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