Government won’t rule out windfall tax despite opposition from ministers

The government has not ruled out imposing an exceptional tax on energy companies despite the strong opposition of several ministers.

Education Secretary Nadhim Zahawi said the Cabinet was considering “all options” to tackle the cost of living crisis, including a one-off tax on businesses that have benefited from high global gas prices and petrol.

Chancellor Rishi Sunak has not ruled out imposing a windfall tax on energy producers, but ministers including Anne-Marie Trevelyan, Brandon Lewis, Sajid Javid and Jacob Rees-Mogg have criticized the measure as ineffective.

Asked about the imposition of a windfall tax by Sky’s Sophy Ridge on Sunday, Mr Zahawi said: ‘We will look at all options.

Nadhim Zahawi said the Cabinet was considering ‘all options’ to ease the cost of living crisis (James Manning/PA)

“I, together with the Chancellor, the Prime Minister and the Cabinet, will consider all options.”

But he spoke of the impact it could have on older people, adding: “If you apply a windfall tax, (companies) will probably have to reduce or withdraw their dividend.

“Who receives the dividend? Retirees through their pension funds.

“The investment has to be real, which I think Rishi (Sunak) will demand from all these companies and to see a roadmap towards that investment. We are not taking any options off the table.

Cabinet meeting

Secretary for International Trade Anne-Marie Trevelyan (Yui Mok/PA).

International Trade Secretary Anne-Marie Trevelyan said the government was encouraging energy producers to invest their profits in green alternatives rather than imposing the tax.

She told Times Radio: “As the Chancellor has said, it’s really important that he can keep everything under control.

“He’s made a very clear position that he wants these energy companies, because they’ve made surprisingly higher profits from these price increases, to use it to invest in the clean energy of the future.”

Ms Trevelyan described a windfall tax as a ‘very short-term measure’, adding: “I don’t think a windfall tax is the most effective way to do anything, I don’t think it advances at a pace”.

Meanwhile, Michael Lewis, chief executive of E.ON UK, called on the government to “tax those with the broadest shoulders”.

He told BBC One’s Sunday Morning TV show that around one million of E.ON’s eight million UK accounts are already overdue, and that is expected to increase by 50% in October.

Mr Lewis said increasing Universal Credit payments and imposing a “social tariff” on energy companies would reduce the cost of bills for those struggling to pay them.

Responding to E.ON’s forecast of how many people are expected to be in arrears by October, Shadow Chancellor Rachel Reeves renewed Labor calls for the government to impose a windfall tax as a matter of urgency.

She said: “These comments underscore how difficult the cost of living crisis is for families and how much worse the Tory delays will make the situation worse.

“The government must act now, by introducing a windfall tax on the profits of oil and gas producers to reduce bills.”