UK upstream warns windfall tax would give "false hopes" to consumers
A proposed windfall tax on oil and gas producers to raise funds to protect households from high energy bills would give consumers "false hopes" and deal out "real damage" to the industry, upstream association OGUK warned on January 5.
The opposition Liberal Democrats have called for the windfall tax to help households struggling with crippling energy bills over the coming months. Party leader Ed Davey said the levy would provide emergency support to help more than 17mn households.
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"It can't be right that a few energy fat cats are raking it in from record gas prices while millions of people can't even afford to heat their homes," he said. "A Robin Hood tax on gas and oil barons would provide vital cash to support vulnerable families facing crippling energy price hikes."
The UK's main opposition Labour party similarly called for a windfall tax on oil and gas profits in 2019, while under the leadership of Jeremy Corbyn. His successor Keir Starmer is yet to weigh in on the issue.
The Conservative government is considering "all options" to mitigate the energy crisis, business Secretary Kwasi Kwarteng told a committee of MPs in late December.
"I'm not a fan of windfall taxes," he said. "But of course [the energy sector] is an entire system and we have to think about how we can get the energy system as a whole to help itself."
OGUK warned the windfall levy would add an extra £700 ($948) to annual UK energy bills, which currently average £1,250, as operators will invest less and the UK's reliance on oil and gas imports would increase. It argued that the treasury was already benefiting from price rises, estimating that it would rake in £3.5bn in extra taxes from last April. The industry already pays a 40% corporate tax, which is roughly double that of any other sector, OGUK said.
"This idea is offering consumers false hope – and the risk of long-term damage to UK Plc," OGUK's external relations director Jenny Stanning said. "In the longer-term a windfall tax would also be the worst thing for consumers because it would damage competitiveness, and discourage energy companies from investing in the UK. That would reduce our energy security and make us even more dependent on imports from places like Russia and the Middle East."
The tax would also undermine decarbonisation efforts, she said, noting that many companies that might be affected were interesting in renewable energy and other low-carbon technologies.