The government will raise a further £14billion next year by raising the energy windfall tax, Jeremy Hunt has announced.
In his first autumn statement as chancellor, he said the Energy Profits Tax, as it is known, will rise from 25% to 35%.
The move follows months of pressure from Labor for ministers to raise more money from the oil and gas giants.
Mr Hunt told MPs he had ‘no objection’ to windfall taxes if they were genuinely about windfall profits caused by unexpected increases in energy prices.
“But any such tax should be temporary, not discourage investment and recognize the cyclical nature of many energy companies,” he said.
He also announced an exceptional tax on electricity producers of 45%. The move means wind farms in UK waters will pay a higher windfall tax than nearby oil and gas rigs. Together the two taxes will bring in £14billion next year, Mr Hunt said.
Announcing his plans, he told MPs the OBR believed the UK was in recession. He said he was paving a “balanced path to stability” which involves “making tough decisions”.
But “anyone who says there are easy answers is not being frank with the British: some are arguing for spending cuts, but that would not be compatible with quality public services”.
His first job was to tackle inflation which “eats the pound into people’s pockets even more insidiously than taxes”, he said.
But Shadow Chancellor Rachel Reeves said after months of resistance the government had ‘finally been kicked and shouted at to extend the windfall tax that Labor first called for in January’.
“The government has announced plans for energy bills next year, but bill payers will see them rise again next spring, leaving far too many wondering how they will make ends meet. For every windfall tax pound left on the table, workers are forced to pay the price,” she said.
Treasury Secretary John Glen later said he “did not accept” the government’s replication of Labor policy on the windfall tax.
Green MP Caroline Lucas welcomed the windfall tax hike but said it was ‘outrageous’ that the Chancellor was ‘keeping the investment allowance, giving a massive subsidy to oil and gas companies incredibly rich”.