Slapping a windfall tax on electricity generators would be a “challenging proposition” and could hamper the UK’s net-zero ambitions, according to business secretary Kwasi Kwarteng.
The business secretary also came out firmly against a windfall tax on oil and gas companies, saying the policy is “not a good idea” in comments that will put him in opposition to chancellor Rishi Sunak.
Sunak wants to impose a levy on excess profits made by British oil and gas firms, after they experienced record returns over the past 12 months, which would see the proceeds go toward families struggling with soaring energy bills.
The Financial Times reported yesterday that Sunak has told Treasury officials to also draw up proposals for the levy to also hit electricity firms. This includes renewable energy generators, like wind farms.
High gas prices have led to excess profits of around £10bn for electricity firms.
When asked about the prospect, Kwarteng told a Westminster committee: “We’re asking the generators to deploy record amounts of capital to build the infrastructure we need to hit the net-zero target. I think, again, [a tax on them is] a challenging proposition.”
Prime Minister Boris Johnson yesterday vowed that he would soon unveil a new package to help Brits dealing with cost of living pressures, with an announcement now expected after the Diamond Jubilee weekend.
It now looks increasingly likely that a windfall tax on North Sea oil and gas producers will help pay for the package, after Number 10 at first blocked the idea.
The Sunday Times reported that the chancellor wants to also bring in the opportunity for tax concessions for energy firms who invest in multi-billion pound projects.
A Treasury source said: “The chancellor has made clear that no options are off the table and that he wants to see significant investment from the industry.”
Several cabinet ministers have come out against a windfall tax, including Kwarteng.
The business secretary today said: “As far as windfall taxes are concerned I’ve been very clear – I don’t think they’re a good idea.
“But we’re under extraordinary circumstances, as people recognise, and that’s something that [Sunak] has not ruled out. It’s an option he’s kept on the table.”
Kwarteng added: “If [Sunak] feels extraordinary times require extraordinary measures then that’s up to him.”
A Treasury spokesperson said: “We understand that people are struggling with rising prices, and while we can’t shield everyone from the global challenges we face, we’re supporting British families to navigate the months ahead with a £22bn package of support.
“This includes 30m people getting a £6bn tax cut worth up to £330 a year from July, millions of households receiving up to £350 each to help with rising energy bills through our £9.1bn support package, and a cut in the Universal Credit taper rate helping over a million families keep around an extra £1000 a year.”