The government has finally announced that it will impose a windfall tax on gas and oil companies to help ease the ongoing cost of living crisis in the UK. The levy will raise £5 billion of revenue to help fund initiatives that include the £400 energy bill grant being offered to all households.
Energy firms will be obliged to pay an additional 25% on profits, plus their usual 40%. But climate change groups are warning that the moves are just a 'sticking plaster' and that they may actually just encourage further production of fossil fuels.
Gas and oil firms made around £11.6 billion in profits this year. The tax will take around £5 billion. Mr Sunak said that firms reinvesting in gas and oil exploration will, however, get a tax relief incentive worth 90%. This means that those firms further exploring fossil fuels will get a 91p saving for each £1 they invest.
The tax offset is also only being offered to the fossil fuel sectors so that no firms will receive tax relief incentives for renewables. This single levy will be in place until December 2025 or until the energy market returns to normal.
Greenpeace and other climate campaigners have warned that that tax may encourage further production of oil and gas and increase Britain's usage of fossil fuels rather than encouraging the much-needed switch to clean energy sources. Greenpeace said that the move to further fund oil and gas exploration and production was 'unjustifiable' and asked why similar incentives were not being offered to clean energy firms.
Green groups are also continuing to lobby for further support in domestic insulation, as grants to improve these measures would help to greatly reduce the need for heating overall.