After months of hesitation, the United Kingdom has finally decided to tax the profits of energy giants in order to finance new measures in the face of rising living costs. While inflation could exceed 10% in the coming months, British Finance Minister Rishi Sunak has unveiled a £ 15bn aid plan that is largely targeted at low-income households.
To fund this plan, he made a new departure from the principle of low taxation – a historical feature of the Tories – by announcing an exceptional tax of £ 5 billion for energy giants. Profits for oil and gas producers will be reduced by 25%. In return, they will benefit from an investment support mechanism that will allow them to get back 90 pounds in tax credit for 1 pound invested. After Italy and Hungary, it is the third European country to commit to taxing energy producers.
Inflation spiral risk
Speaking to the House of Commons, Rishi Sunak advocated “early, targeted and temporary” intervention, and sought to dispel the idea that this fiscal support could increase the risk of an inflationary spiral. The announcement sounds like a conversion from someone who has so far rejected the idea of taxing energy giants and argued that it would penalize investment. Her £ 9 billion first aid plan, announced in February, was seen as largely inadequate. Since then, he has been under pressure to reconcile budget extensions.
In the Labor opposition, shadow Chancellor Rachel Reeves did not shy away from the pleasure that the Conservatives would accept this tax on oil giants. “There is no doubt who will win the Battle of Ideas in Britain. It’s a job! “, She started. Five months have passed since the facility has tirelessly defended itself due to massive gains generated by the sector’s heavyweight, such as the $ 5 billion gains reported by BP in the first quarter, unheard of in ten years. Its boss, Bernard Looney, likened the rise in energy prices to his group’s “ATM”.
Another difficult pass for Boris Johnson
Another angle of attack from the opposition: this announcement comes in a new difficult submission for Boris Johnson after the incriminating report on the holidays in Downing Street. This has been criticized as another tactic of deviating from the prime minister, whose position is again weakened. “Conservatives are doing it now because they need new headlines,” Rachel Reeves said.
In terms of aid terms, this new plan also seems to be reversed from the February announcements. In particular, the government canceled the £ 200 aid planned for October, which was to be gradually repaid. A mechanism that was a bit like an interest-free consumer loan, but risky if households are unable to repay. Eventually, the idea of subsequent reimbursement was abandoned and the assistance received by all households would increase to £ 400.
Further assistance was targeted at the most vulnerable sections of the population. The 8 million poorest households will receive another £ 650. As for retirees, the poorest 8 million will receive a subsidy of £ 300. In total, the most vulnerable households will be able to obtain approximately 1,200 books. This is equivalent to the average increase in energy bills expected for British households this year.