MPs voted to block Labour's North Sea windfall tax yesterday - but Chancellor Rishi Sunak has again hinted that he is willing to consider the levy if energy companies don't reinvest profits in the UK.
Speaking in the House of Commons on Tuesday, Mr Sunak repeated the UK Government’s public position on a windfall tax, which avoids making a final decision on the proposal.
Mr Sunak said: “We are pragmatic and what we want to see are energy companies who have made extraordinary profits at a time of acutely elevated prices investing those profits back into British jobs, growth and energy security.
“But as I have been clear, and as I have said repeatedly, if that doesn’t happen soon and at significant scale then no option is off the table.”
The holding position reflects the Tories’ traditional stance that windfall taxes would deter investment, but does not rule out the adoption of the move.
Labour attempted to force an amendment to the Queen’s Speech to bring in the windfall tax on Tuesday but Tory MPs were ordered to vote it down.
Aberdeen & Grampian Chamber of Commerce estimates that the North Sea tax yield for 2022/23 alone may well be more than the £8.1billion forecast by the Office for Budget Responsibility (OBR) and perhaps closer to £10billion according to industry sources.
If it reached £10billion, then that would be a £7.2billion increase from the 2020 forecast and sufficient incremental tax revenues to fund the support for consumers that some opposition parties have called for.
However, the Telegraph reports that ministers are warming to energy windfall tax after polling finds it ‘wildly popular’ with public.
Voter research conducted in Whitehall has found that as many as eight in 10 people back the tax raid on energy companies with increased profits, newspaper said.
The polling and focus grouping is said to have found that voters consider oil and gas companies “corporate cowboys” given that they are profiting off soaring prices which are impacting the public.
This is despite oil and gas companies paying tax on profits from production in the UKCS at a rate of 40%, comprising both Ring Fence Corporation Tax plus a Supplementary Charge (RFCT/SC).
The normal rate of corporation tax in the UK is 19%, so North Sea companies are already paying more than double this.