UK Finance Minister Rishi Sunak has imposed a windfall tax on oil and gas majors as the government scrambles to alleviate the country’s worsening cost-of-living crisis, Report informs referring to CNBC.
The measures come a day after a deeply embarrassing investigation into lockdown parties at Downing Street and amid sustained pressure on the ruling Conservative government to do more as soaring inflation pushes up the price of everything from food to fuel.
“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,” Sunak told lawmakers in the House of Commons on May 26.
“And for that reason, I am sympathetic to the argument to tax those profits fairly,” Sunak said, prompting jeers from opposition lawmakers.
Sunak said the government is imposing a temporary targeted energy profits levy with a so-called “investment allowance” to incentivize oil and gas firms to re-invest their profits. The new levy will be charged on the profits of oil and gas companies at a rate of 25%, before being phased out when commodity prices return to more normal levels.
Sunak said soaring inflation is causing “acute distress,” with the economic situation becoming more serious over the course of this year.
UK inflation jumped to 9% last month as food and energy prices spiraled, reaching its highest annual rate in 40 years. The Bank of England expects inflation to rise above 10% later this year.
Sunak said around 8 million of the lowest income households will be sent a one-off cost-of-living payment of £650 ($819). The first payment will be issued directly to people’s bank accounts in July, with the second payment sent in the fall.
The finance minister announced that 8 million pensioner households will receive an extra winter fuel payment of £300 and a one-off disability cost of living payment of £150.
Sunak also said a £200 loan for energy bills now no longer needs to be paid back and increased this support for households to £400.