By Charlie Kimber
Downloading PDF. Please wait... Issue 2807

Sunak’s windfall tax barely touches energy bosses’ billion pound profits

But Keir Starmer's Labour Party was proposing an even smaller package of support last month
Issue 2807
A picture of a petrol station sign showing high prices to illustrate a story about Sunak's windfall tax

Oil and gas companies have made billions. Sunak’s windfall tax isn’t a huge threat to them

Fear of losing votes, collapsing energy firms and anger in society has forced Rishi Sunak to promise some action on the soaring costs of gas and electricity. But the one-off payments are far less than are needed. They won’t stop a rise in poverty, cold, malnutrition and deaths later this year.

Chancellor Sunak told the House of Commons on Thursday that more than eight million households will receive a one-off payment of £650. This includes those on universal credit and tax credits. The first part will come in July and the second in the autumn. 

Separately, to those pensioners who receive winter fuel payments, the government will provide a £300 one-off payment. The six million people who receive disability benefits will receive a one-off payment of £150 from September.

The move is a shift from standing aside and saying that nothing can be done, as Sunak claimed when inflation rose to 11 percent a week earlier. It’s surely no coincidence that the announcement came 24 hours after Boris Johnson’s empty apology over partygate. 

But the package does no more than partly offset—for some—a coming further surge in bills. Jonathan Brearley, chief executive of regulator Ofgem, told MPs this week he was on course to raise the cap on household energy bills by over £800 in October. 

It will mean that energy prices this year are rising 23 times faster than wages, and 38 times faster than benefits. Ofgem already increased the cap on average bills by £693 in April to £1,971. Such an increase will more than wipe out Sunak’s announcement today for millions of people. If your bills go up £800 and you have £650 to help pay it, you are still much worse off. 

It’s not just fuel that’s going up. So are food, rents, transport and much more. There’s no payment to cover those. And then there are the people who earn too much to be on benefits. It doesn’t mean they are well off. 

They will be left only with a £400 payment that’s promised to all households. This is actually an additional £200 as it’s a doubling of the previously announced energy bill rebate, although it won’t have to be repaid.

Just £400 is nowhere near enough to stop the pain of price rises. Behind all the figures is a simple truth. These payments are always reported as supporting “vulnerable people”. In reality, they are designed to maintain the profits of the privatised energy firms that would otherwise face an epidemic of forced non-payment. That would mean some of the companies would collapse.

Sunak’s package is actually a profits support package.bHe said part of the cost would be covered by a Temporary Targeted Energy Profits Levy. The convoluted name is a desperate effort to avoid saying the words windfall tax that he had repeatedly rejected.

Sunak said the windfall tax “will be charged on oil and gas company profits at a rate of 25 percent and is expected to raise around £5 billion in its first 12 months”. That might sound a lot, but it’s loose change to the fossil fuel giants.

Shell made £7.3 billion just in the first three months of the year. It immediately handed £4.3 billion to shareholders. BP recorded almost £5 billion profit in the same time period. Together Shell and BP are on track to grab nearly £50 billion profit this year. The windfall tax is a tenth of that.

To ensure the figure is low, Sunak said that oil and gas companies that invest will get tax relief on 80 percent of that spending. That will be a bonanza for accountants to work out ways to protect companies’ loot. And why isn’t there a tax on all the other firms making massive profits such as the supermarkets?

In any case a one-off tax leaves in place the profit-delivering machine of the privatised energy market. Any genuine move to deliver affordable fuel and a sustainable future has to be based on democratic public ownership, not leaving the fat cats in charge. 

The Labour Party is revelling in the Tories’ embarrassment of adopting big elements of a policy that Keir Starmer put forward weeks ago. The Scottish National Party has also dropped its previous boss-coddling opposition to the North Sea windfall tax.

But Labour has such a limited vision of change. In fact, Sunak’s proposals go far beyond what Labour put forward in January. Back then shadow chancellor Rachel Reeves revealed a plan which would have delivered £600 to low-income households and £200 to everyone else. This would have been partly funded by a £2 billion windfall tax.By contrast the Sunak scheme will deliver £1,200 to the poorest households and £400 to everyone else, part-funded by a windfall tax of £5 billion. We need more strikes and mass protests to defend and improve working class lives.  

  • TUC union federation’s national demonstration: We Demand Better: march and rally, Sat 18 June, Portland Place, London. Assemble from 10.30am. Details and transport at bit.ly/TUC1806 

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