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Furious Tories accused Rishi Sunak of ‘throwing red meat to socialists’ and risking investment after he U-turned to impose a windfall tax on surging oil and gas firm profits.
In a statement to MPs, the Chancellor said he is following in the footsteps of previous Conservative governments – including Margaret Thatcher’s – with the levy.
The profits of companies such as BP will be subject to a 25 per cent charge to raise around £5billion a year, and the policy will potentially stay in place until December 2025 – longer than expected.
Mr Sunak said the move was necessary ‘so that we can help families with the cost of living‘ while avoiding hiking the ‘debt burden further’.
But he came under heavy fire from his own side in the Commons, with the tax branded ‘not the Conservative way’.
Meanwhile, Labour goaded that he had been forced into copying a policy that it has been demanding for months.
In a statement to MPs, Rishi Sunak said he is following in the footsteps of previous Conservative governments – including Margaret Thatcher’s – by imposing a windfall tax
David Davis (left) and Richard Drax (right) both condemned the windfall tax in the Commons
The profits of companies such as BP will be subject to a 25 per cent charge to raise around £5billion a year
Announcing the latest chunky £15billion cost-of-living bailout in Parliament, Mr Sunak laid out a series of handouts for struggling households to cope with soaring inflation and energy costs.
He said: ‘Like previous governments, including Conservative ones, we will introduce a temporary targeted energy profits levy, but we have built into the new levy… a new investment allowance similar to the super-deduction that means companies will have a new and significant incentive to reinvest their profits,’ he said.
‘The new levy will be charged on profits of oil and gas companies at a rate of 25 per cent.
‘It will be temporary and when oil and gas prices return to historically more normal levels the levy will be phased out.’
Mr Sunak went on: ‘Because there is nothing noble about burdening future generations with evermore debt today because politicians of the day were too weak to make the tough decisions.’
But former minister David Davis questioned the level of tax and justification for a windfall tax.
He gave ‘unreserved welcome for the help for the ordinary citizens’, but raised ‘two concerns’.
Mr Davis said: ‘He talked about the risk of excessive fiscal stimulus. How does he reconcile that with the fact the latest figures show we are taking more money out of the economy than we ever have in history?
‘On the windfall tax, it will raise a small amount of money. Stability of tax and low tax both encourage investment and growth. Is there not a risk that the Exchequer will lose more in growth then it will gain in a windfall tax?’
Mr Sunak said: ‘We actually are still running a relatively significant budget deficit this year, forecast to be 4 per cent back in spring, so I wouldn’t regard that as particularly tight policy on the fiscal side. And we will further, as I said, add support today.
‘With regard to tax, I do believe it is important to continue to support investment. I believe the way that we have designed the energy profits levy, with a doubling of the investment relief in it, will mean that companies still have a very strong incentive to invest in the North Sea.’
Fellow Tory Richard Drax said it was ‘not the Conservative way’ to raise taxes on business.
‘Can I warn my Right Honourable Friend that by throwing red meat to socialists by raising taxes on businesses and telling them where to invest their money is not the Conservative way of encouraging those who create our prosperity and jobs to do just that.
Does he agree with me that by setting this bar we are in danger were we ever to lose power of allowing the socialists to raise it, which they would do again and again and again.’
Shadow chancellor Rachel Reeves goaded Mr Sunak over his volte face on the windfall tax, saying he was desperate for a ‘new headline’ after Partygate.
‘Every day for five months, the Prime Minister sent Conservative MPs out to attack the windfall tax and yet defends an increase in taxes on working people,’ he said.
‘He has made them vote against it not once, not twice, but three times – and for months he has sent his MPs to defend the litany of rule-breaking in Number 10 Downing Street set out in the Sue Gray report yesterday.
‘There is a lesson here for Conservative MPs – you can’t believe a word that this Prime Minister says.’
She added: ‘Labour called for a windfall tax because it is the right thing to do.
‘The Conservatives are doing it because they needed a new headline.’
A spokesman for oil giant Shell said: ‘We have consistently emphasised the importance of a stable environment for long-term investment.
‘This is fundamental to our aim to invest between £20 and £25billion in the UK in the next decade, mostly in low and zero-carbon products and services, with a significant amount also focused on ensuring security of energy supply for the UK.
‘The Chancellor’s proposed tax relief on investments in Britain’s energy future is a critical principle in the new levy.
‘We recognise the burden that increased energy prices have across society, in particular on the vulnerable, and have hardship plans in place to help our customers.’
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