Ed Miliband has criticised the government for not doing enough to tackle energy profits.
BP on Tuesday (August 1) reported net profits of $2.6bn (£2bn) for the three months to the end of June.
Miliband said, “These figures demonstrate the continuing scandal of the Tory failure to act on the windfalls of war being pocketed by the oil and gas producers.
“Labour would bring in a proper windfall tax on oil and gas giants to help tackle the cost-of-living crisis, alongside our plan to make Britain a clean energy superpower so we can lower bills for families and businesses.”
A windfall tax was put on the profits that oil and gas companies make from the North Sea. However, it has included the ability to reduce the tax if the companies invest, something the opposition has called a “loophole”.
The windfall tax was first introduced a year ago following Russia’s invasion of Ukraine, which saw energy prices soar, and has since raised £2.8 billion.
If the energy prices don’t fall, the windfall tax will remain in place until 2028.
But what is a windfall tax? Here’s everything you need to know.
What is a windfall tax?
A windfall tax is a one-off tax that the Government imposes on a company or a group of companies when they benefit from something that happened outside their control.
Energy companies are benefitting from the increased demand for energy following the pandemic and Russia’s invasion of Ukraine.
The owner of British Gas, Centrica, revealed it made record profits of more than £3.3 billion last year. It more than trebled its underlying profits to £3.31 billion from £948 million in 2021.
This revelation follows news that BP’s annual profits more than doubled to £23 billion in 2022, on the back of the Ukraine invasion.
It also follows Shell revelation of a £32.2 billion profit, the largest in its 115-year history — also attributed to a rise in gas prices following Russia’s invasion.
The announcement triggered new calls for a windfall tax to be placed on energy giants to fund support for households struggling during the cost-of-living crisis.
Who is calling for a windfall tax on oil and gas companies?
Ed Miliband, the shadow secretary of state for climate change and net zero, has said: “Rishi Sunak is letting the fossil-fuel companies make bumper profits off the hook with his refusal to do a proper windfall tax. Labour would stop the energy price cap going up.”
Last year, he said: “Another day, another oil and gas company making billions in profits, and yet another day when the Government shamefully refuses to act with a windfall tax to bring down bills.”
Labour MP Richard Burgon posted on Twitter: “Shell just reported record profits of £32,000,000,000 Such outrageous profits are why your bills are so high.
“We need to hike the Windfall Tax so North Sea oil and gas giants don’t make a single penny in excess profits off the back of higher energy bills for ordinary people.”
Shell just reported record profits of £32,000,000,000
— Richard Burgon MP (@RichardBurgon) February 2, 2023
Such outrageous profits are why your bills are so high.
We need to hike the Windfall Tax so North Sea oil and gas giants don't make a single penny in excess profits off the back of higher energy bills for ordinary people.
Labour MP Nadia Whittoms said: “Not everyone is suffering from a cost-of-living crisis. In 2022, Shell made £32,200,000,000 in profit - by far the most in its entire history. Time to end this profiteering from misery. Instead of another bill hike, we need a proper windfall tax.”
Last year, Philip Evans, Greenpeace UK’s oil and gas campaigner, called for a windfall tax and said: “By using a big chunk of the bloated profits that Shell, BP, and others are raking in, to make homes warmer, more energy efficient, and kitted out with heat pumps, the Government could start to really tackle the climate and cost-of-living crises simultaneously. ”
What has the Government said about a windfall tax?
Chancellor Jeremy Hunt revealed in the Autumn Budget that he would be increasing the windfall tax paid by energy companies.
In his statement, he said: “I have no objection to windfall taxes if they are genuinely about windfall profits caused by unexpected increases in energy prices.
“But any such tax should be temporary, not deter investment, and recognise the cyclical nature of energy businesses.”
Mr Hunt said from January 1 until March 2028, the Government will increase the Energy Profits Levy from 25 per cent to 35 per cent.
Furthermore, the Government will introduce a temporary 45 per cent levy on electricity generators. He said that increasing these taxes will raise £14 billion next year.
