“It’s rampant profiteering and needs to stop. We cannot continue to let private companies make obscene amounts of profits from our essential services while people can’t afford to heat their homes.”
By Kate Osborne
“Windfall tax debate rages as BP joins Shell in achieving record annual profits”
“BP announces record annual profits of £23bn”
One news outlet, two headlines, 17 minutes apart. The swiftness of the headline change would make anyone suspect there’s an effort to shut down debate about a windfall tax on the energy giants.
But there shouldn’t be a need for debate, when millions can’t afford to turn on their heating or cook food for their families.
Shell and BP’s combined shareholder bonanza of £55 billion is the biggest in history. They aren’t alone. ExxonMobil, Chevron and others are all beating their personal bests.
It’s rampant profiteering and needs to stop. We cannot continue to let private companies make obscene amounts of profits from our essential services while people can’t afford to heat their homes. Or at any time.
Yes we need a proper windfall tax on energy companies’ profits, but it needs to be properly “proper”, so that it actually cuts people’s bills.
The Tories claim increasing the tax will stop investment and increase energy prices, but the Norwegian government has no such qualms.
It takes billions more out of North Sea oil profits. Why should oil and gas companies pay less to drill in British waters than they do in Norway?
A Norway-style windfall tax of around 78% could raise £33.3bn extra for the UK by 2027, according to the think-tank Green Alliance.
Others are trying similar actions. The Czech parliament has set a windfall tax of 60 per cent on energy firms and banks, aiming to raise $3.4 billion next year to raise money to help people and firms struggling with soaring prices.
Greece has imposed a 90 per cent retroactive tax on power producers’ windfall profits from wholesale electricity prices from October 2021 to June 2022 in order to raise €373.5 million. Greece has among the lowest electricity tariffs in Europe.
By contrast, the UK’s Energy Profit Levy of 25 per cent, introduced in the Energy Prices Bill last year, is woefully inadequate. It continues to allow companies to make excess profits from a global crisis and enables them to claw back the windfall tax under the investment scheme by claiming as a tax break 91p in every pound they invest in more North Sea production.
Perversely, renewables companies are hit by a revenue cap.
It’s all about choices, and whether any government thinks the profit margins of fossil fuel companies are more important than balancing the books – or keeping our children warm. The Tories of course will never act to stop such obscene profiteering, because lining the pockets of their rich mates is all they care about.
They already took the lowest amount of tax anywhere in the world from oil and gas producers before the windfall tax, an the UK still taxes them below the global average.
Last year, Joe Biden threatened the oil and gas industry with a windfall tax and accused it of war profiteering. In his State of the Union address last week, he again laid into Big Oil’s record $200 billion profits in the midst of a global energy crisis, describing them as “outrageous”.
Instead of using those profits to invest in production and keep fuel prices down, he said, they’re using them to buy back stock, “rewarding their CEOs and shareholders”. Biden is effectively accusing the producers of actively choosing not to ease the burden on consumers for the duration of the war in Ukraine.
He’s not wrong. Gas prices in Europe have been falling for months, but our bills keep rising.
Biden’s proposal to deal with the energy giants is to quadruple taxes and share repurchases, noting they will still make a “considerable profit”. These are bold statements and proposals that should fuel the debate and expose the UK government’s timidity, although Biden’s windfall tax threat hasn’t been carried through and there’s little reason to expect those measures would get through Congress.
Of course, windfall taxes are temporary fixes. They must go hand in hand with public ownership for the long term to ensure energy security for our communities.
Water, electricity and gas networks in the Netherlands are all publicly owned and public ownership structures investing in energy generation is standard practice across Europe, including in France, Denmark, Germany, Sweden and Norway.
Germany acted to nationalise Uniper – its biggest gas importer – and France did the same with EDF, its biggest utility company.
This is a long way from a fundamental overhaul of ownership of the energy sector, but it is a start. It shows there are alternatives, that there are ways of ensuring we can freeze bills, not people.
- Kate Osborne is the MP for Jarrow and a regular contributor to Labour Outlook. You can follow her on Facebook, twitter and Instagram.
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