Rishi Sunak set to announce one-off tax and possible energy bill subsidy

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Chancellor Rishi Sunak is expected to bow to pressure to impose a windfall tax on oil and gas companies when he unveils a major package to ease the cost of living crisis.

Treasury sources have not denied reports that it will use its announcement on Thursday to scrap the requirement to repay the £200 rebate on energy bills and may increase the level of the subsidy.

Mr Sunak will detail his plan in the Commons as the government seeks to draw a line under the party row and focus on the squeeze on living standards caused by soaring inflation.

Details of the one-off tax to fund new support measures were not known, but Labor is likely to claim some kind of victory after campaigning for the measure against Boris Johnson’s opposition.

Measures which have been discussed as part of a package worth around £10billion could include a further increase in the hot house rebate to help low-income households cope with the increased energy bills.

(PA graphics) / PA Graphics

Other measures that have been discussed include increases in the winter fuel allowance, a further reduction in council tax or a reduction in VAT.

The need for further help was illustrated by Ofgem chief executive Jonathan Brearley’s indication that the energy price cap will rise a further £830 to £2,800 in October.

The Times reported that the previously announced £200 loan on energy bills will be replaced by a grant that will not have to be repaid, with the rebate of up to £400.

Ministers have spent months criticizing the idea of ​​a windfall tax because of its potential impact on investment.

But on Wednesday, a Tory source said the arguments had been “rigorously tested” within the Treasury and the wider government.

“There’s a high threshold that any package we offer provides more gain than pain, that the gain is worth it, that it doesn’t compromise the investment,” he said.

“You are not introducing random taxes that make the economic environment unpredictable.”

Offshore Energies UK (OEUK), which represents the offshore oil and gas industry, has warned that a one-off tax on North Sea companies would drive up prices and hurt the oil and gas industry in the long term.

Chancellor Rishi Sunak has come under pressure to provide aid (Daniel Leal/PA) / PA wire

The chancellor will have to ensure that any additional aid he gives to the economy does not further increase inflation, which is at its highest level in 40 years.

As well as the possible impact on inflation, the chancellor’s ability to help beyond the £22billion package already announced will also be limited by the state of the country’s finances.

A Treasury spokesperson said: “The Chancellor has been clear that our response will evolve as the situation evolves, with the most vulnerable being his number one priority.

“He will give more details tomorrow.”

The Prime Minister said the hundreds of billions poured in to deal with the Covid pandemic had left a “very difficult budgetary situation”.

Speaking at a Downing Street press conference, he acknowledged that households ‘are going to be under pressure for some time’ due to soaring global energy prices and supply chain issues as a result. of the pandemic.

But he said: “We will continue to respond, just as we have responded throughout the pandemic.

“It won’t be easy, we won’t be able to fix everything.

“But what I would also say is we’ll get through this and we’ll do well.”

Mr Johnson said a windfall tax would ‘deter investment’, be ‘totally ridiculous’ and ‘raise prices for consumers’.

Labor leader Sir Keir Starmer has pushed for a windfall tax (Dominic Lipinski/PA) / PA wire

The chancellor has also voiced his opposition but has started laying the groundwork for a change in policy in recent weeks, saying he is “pragmatic” about the possibility.

Some of the strongest criticism came from Brexit Opportunities Minister Jacob Rees-Mogg, who argued that it was wrong to plunder the ‘corporate honeypot’ and that the measure would ultimately see the public pay more taxes.

But Labor leader Sir Keir Starmer argued a U-turn was ‘inevitable’ as the tax on North Sea companies ‘would raise billions of pounds, cutting energy bills across the country’.

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