UK announces £5bn windfall tax on oil and gas firms in bid to tackle rising bills

Boris Johnson’s government has imposed a 25 per cent windfall tax on oil and gas producers’ profits to fund part of a £15 billion package of measures to help consumers to pay soaring energy bills. Every household will receive £400 off their energy bill and households receiving social welfare benefits will qualify for a one-off £650 cost of living payment.

The windfall tax, which Labour has long been calling for and was until now rejected by the government, will raise £5 billion. This is more than twice as much as Labour’s proposed scheme would have raised, and the support for households is also more generous than what the opposition called for.

“The oil and gas sector is making extraordinary profits, not as the result of recent changes to risk-taking or innovation or efficiency, but as the result of surging global commodity prices driven in part by Russia’s war,” chancellor of the exchequer Rishi Sunak said. “We will introduce a temporary and targeted energy profits levy but we have built into the new levy a new investment allowance that means companies will have a new and significant incentive to reinvest their profits.”

Mr Sunak abandoned a plan to give households a £200 loan to help with energy bills, making clear that the payments announced on Thursday will not have to be repaid. Labour’s shadow chancellor Rachel Reeves said the loan plan had always been destined to fail. “There couldn’t be a more appropriate illustration of this Conservative government’s lacklustre, out-of-touch approach to managing our economy – arriving at the common sense solution months too late. And they still have no long-term plan to grow our economy and pull us out of the mess they’ve got us into.”

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Mr Sunak’s announcement came as three more Conservative MPs withdrew their support from the prime minister in response to senior civil servant Sue Gray’s report on lockdown-breaking parties in Downing Street.

John Baron, David Simmonds and Stephen Hammond said that Ms Gray’s findings about multiple gatherings in breach of the rules meant they could no longer support Mr Johnson.

“Given the scale of rule-breaking in No 10, I cannot accept that the prime minister was unaware. Therefore his repeated assurances in parliament that there was no rule-breaking is simply not credible,” Mr Baron said in a statement. “Having always said I would consider all the available evidence before deciding, I’m afraid the prime minister no longer enjoys my support. I can no longer give him the benefit of the doubt.”

It takes 54 Conservative MPs to trigger a confidence vote in Mr Johnson’s leadership and fewer than a third of that number have publicly called for him to go. But Mr Simmonds said it was becoming evident that the prime minister was now a drag on the Conservative party’s popularity.

“It is clear that while the government and our policies enjoy the confidence of the public the prime minister does not,” he said. “Accordingly, it is time for him to step down so that new leadership can take forward the important work of the government in ensuring that our people and country prosper.”