The boss of British Gas owner Centrica defended it raking in tens of millions of pounds in profits as families woke up on Friday to sky-rocketing energy bills.
With the nation heading into the worst cost-of-living squeeze for nearly 70 years, energy firms faced growing questions over the profits they are making and the Government over whether it should be doing more to help struggling households. Centrica chief executive Chris O’Shea admitted the energy giant’s pre-tax profits jumped by more than £500 million from its oil and gas exploration and production businesses last year.
He insisted, though, that 80 per cent of the additional profits had gone to the Government, leaving the firm with about £100 million. Rejecting calls for a windfall tax, he also emphasised that profits from its retail arm had “reduced quite substantially” to just over £100 million.
As Centrica and other energy giants continue to make hefty profits, at least in parts of their businesses, the Government faced calls to take more decisive action on the cost-of-living crisis.
Experts warned that 2.5 million more households face being plunged into “fuel stress” due to soaring energy bills.
Repeating his call for a windfall tax on oil and gas giants to help struggling households by up to £600 with their bills, Labour leader Sir Keir Starmer told Sky News: “People are really struggling and I just don’t think the Government gets it.”
Police minister Kit Malthouse, doing the Government media round, denied it had a “tin ear” to the scale of the crisis.
He said it acknowledged that “it is very tough at the moment” as inflation spirals towards eight per cent, energy bills jump, and the 1.25 percentage point rise in National Insurance contributions is also due to hit to raise £12 billion for the NHS and social care.
He listed a series of support measures introduced by the Government, such a £9 billion package to ease the impact of rising bills, increasing the Household Support Fund, the minimum wage rise, raising the threshold for paying NI to £12,570, cutting fuel duty by 5p a litre.
Mr Malthouse also signalled that Chancellor Rishi Sunak may offer more help, possibly in the autumn. However, the Government is under pressure, including from Tory MPs, to do more now.
Thatcherite former Cabinet minister John Redwood tweeted: “Today the cost of living crisis hits. The Treasury needs to take urgent action to cut taxes to offset more of the squeeze.”
Energy bills soared after the price cap for those on default tariffs, who pay by direct debit, increased by £693 from £1,277 to £1,971. Prepayment customers saw a bigger jump, with their price cap going up by £708, from £1,309 to £2,017.
The regulator increased the energy price cap to a record £1,971 for a typical household as gas prices soared to unprecedented highs.
Pressed on Centrica’s profits, Mr O’Shea told the BBC Sounds Podcast Big Green Money Show: “We do have an oil and gas exploration and production business which has activities, primarily in Norway and the UK.
“Last year the pre-tax profits went up substantially but they are also heavily taxed… 80 per cent of the additional profits have gone to the Government.
“So, the profits have gone up by just over £500 million and the tax bill has gone up by just over £400 (million).”
He said profits from its energy retail arm had “reduced quite substantially”.
He continued: “We made last year, 2021, just over £100 million in that business. But in reality we made a margin of 1.7 per cent.”
The Resolution Foundation think tank said the number of English households in fuel stress — those spending at least 10 per cent of their total budgets on energy bills — was set to double overnight from 2.5 to five million.
Citizens Advice said about five million people would be unable to pay their energy bills from April.
