Labour urges Tories to back expansion of windfall tax ahead of price cap rise

Katie Neame
© OgnjenO/Shutterstock.com

Labour has urged the Tories to back an expansion of the windfall tax on oil and gas companies to cover the cost of freezing household energy bills ahead of the announcement of the new energy price cap on Friday.

Labour emphasised that energy bills are sky-rocketing at the same time that oil and gas companies are announcing record profits. In its latest projections, Consultancy Cornwall Insight estimated that the price cap would rise to £3,553 from October.

BP reported earlier this month that its profits had tripled to nearly £7bn in the second quarter of the year, while Shell revealed in July that it made record profits of £9.5bn between April and June. The opposition accused North Sea oil and gas producers of making profits “at the expense of the British people”.

Ed Miliband said: “We are now less than 24 hours away from the energy price cap rising yet again, but we have heard no serious proposals from the Conservative leadership candidates on how to stop this national emergency.

“We simply cannot allow the British people to suffer a further increase in energy bills. It is intolerable that the Conservatives continue to offer no solutions to this crisis and oppose Labour’s plans to freeze energy bills, paid for by expanding the windfall tax on oil and gas producers making record profits.

The Shadow Climate Change and Net Zero Secretary said Tory leadership contenders Liz Truss and Rishi Sunak “obviously care more about the balance sheets of big oil and gas businesses than they do about keeping money in working people’s pockets”.

“This is a government that is not on working people’s side. Only Labour can give Britain the fresh start it needs – with a plan to tackle the cost-of-living crisis now and build a more secure country,” Miliband added.

Labour announced last week that it would freeze gas and electricity prices immediately, keeping the energy price cap at its current level of £1,971 until April – a move it said would save the typical household £1,000.

The opposition said its plan – which would cost £29bn – could be paid for in part by making changes to the windfall tax, including backdating the tax to include excess profits made since January and closing the loophole in the levy that allows tax relief on investment in the North Sea.

Sunak announced in May that the government would be introducing an energy profits levy on the “extraordinary profits” of the oil and gas sector. The government’s levy includes an investment allowance that means businesses receive 91p in tax savings for every £1 invested in the North Sea.

Announcing Labour’s plan last week, Keir Starmer said: “We’ve got to make a choice. We can either let oil and gas companies continue to make huge profits that they didn’t expect to make whilst families and millions of people struggle to pay their bills or we do something about it.”

“The Labour Party is not going to stand by. We have made the choice that those oil and gas companies should pay a windfall tax on the excess profits that they didn’t expect to make so that we can freeze the cost for families,” the Labour leader added.

Miliband accused the Conservatives of being “missing in action” on the cost-of-living crisis earlier this month after the government failed to agree any new support measures in a meeting with energy company executives.

The Treasury revealed that Chancellor Nadhim Zahawi and the energy firms had agreed to “work closely” over the coming weeks to “ensure that the public, including vulnerable customers, are supported”. But Boris Johnson told attendees it would fall to his successor as Prime Minister to make “significant fiscal decisions”.

Tory leadership frontrunner Truss has expressed strong opposition to the windfall tax, telling attendees at one Tory leadership hustings: “I absolutely don’t support a windfall tax [on the energy companies] because it’s a Labour idea, and it’s all about bashing business.”

Asked last week whether she backed the idea of freezing energy bills, the Foreign Secretary said: “What I worry about is putting a sticking plaster on this to say we will find the money but be in the same situation in six months’ time.”

Sunak said this morning that he did not think Labour’s plan is the “right plan”. The former Chancellor added: “I think it’s not right to say that it’s fully costed, because I think it’s been widely criticised for its credibility of that costing.”

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