It is only fair that companies that have made genuine windfall profits as a result of the fallout of the war in Ukraine contribute more to fund the Government’s cost of living support.
The Government introduced the Energy Profits Levy from 26 May in response to sharp increases in oil and gas prices over the past year and to help fund cost of living support for UK households. It was levied as a 25 per cent surcharge on UK oil and gas profits, taking the combined headline tax rate for oil and gas companies operating in the UK and on the UK Continental Shelf to 65 per cent.
In the Autumn Statement, the Chancellor confirmed that this will be increased and extended. From 2023, the Energy Profits Levy will increase to 35 per cent, and will be extended to 2028.
The Chancellor will also introduce a Levy on the profits of electricity generators. Currently, our energy prices are set by the wholesale price of gas. This means that generators of renewable energy, which have far lower production costs, are making extraordinary windfall taxes at the moment. Therefore, from 1 January 2023, there will be a temporary 45 per cent levy on these low-carbon producers.
Taken together, these taxes raise £14 billion next year and £52 billion over the next six years.