Chancellor Rishi Sunak outlines further measures to tackle the cost of living crisis
The Chancellor Rishi Sunak has just outlined further measures to tackle the cost of living crisis, partly funded by a temporary levy on the profits of oil and gas companies (windfall tax) at a rate of 25%.
Please see below a summary of his statement to the House of Commons in the past half hour, SCC will be issuing a statement in response shortly.
Statement by Chancellor Rishi Sunak to the House of Commons – 26th May 2022
- High inflation is causing “acute distress” for people. Inflation is at its highest rate for 40 years. It is expected to average 9% this year.
- Fiscal support should be “timely, temporary and targeted”. The government will provide significant support, he says.
- As it supports people more, it needs to think of the fairest way to fund that.
- The oil and gas sector is making extraordinary profits, not because of extra risk taking or efficiency, but because of surging energy prices. So he is sympathetic to the case of taxing those profits fairly.
- An investment allowance has been built into the windfall tax. New levy will be charged at 25% of profits. This is expected to raise about £5 billion pounds.
- The levy will be phased out when prices return to more normal levels and the more a company invest the less tax they will pay.
- Around eight million of the lowest income households will be sent a one-off payment of £650.
- The chancellor has also made the £200 loan for energy bills a grant that no longer needs to be paid back and increased its sum to £400.
- Eight million pensioner households who get the winter fuel payment will get payments of £300.
- And Sunak says the six million people who get disability benefits will get payments of £150. He says many people in this group will also get the £650 announced earlier.
- He says total support for people on low incomes will be worth £9bn, and will go to a third of UK households.
Following confirmation of the additional energy producers’ profits levy on companies by the UK Government, Dr Liz Cameron CBE, Chief Executive of the Scottish Chambers of Commerce, said:
“Scotland’s businesses warned about the damaging impact that any sort of additional windfall tax on energy companies would have on the economy and our ability to secure a successful energy transition that protects jobs and communities.
“It is extremely disheartening that the UK Government have chosen to introduce this additional levy which will inevitably deter investment and make Scotland and the UK a less attractive market internationally, adding to the pressures facing the business community.
“Whilst it’s right that the Government take steps to ease the cost of living crisis this levy is a short term solution to the long-term energy challenges businesses and consumers continue to face.
“Rather than supporting investment in decarbonisation and energy security, this levy will only serve as a sticking plaster for rapidly rising bills, does little to support businesses and is ultimately a short sighted and opportunistic policy from the Treasury.
“With yet again no additional financial support announced for SMEs, this was another missed opportunity by the Chancellor to introduce a SME energy price cap or address the rising costs of doing business that is now dragging on economic growth.”
Commenting, Ryan Crighton, Policy Director at Aberdeen & Grampian Chamber of Commerce, said:
“Where the industry, the Chancellor and Prime Minister agree is that a windfall tax will deter investment in both the North Sea and our energy transition. All three have been repeating that mantra for months now.
“In the short-term, taking an additional £5billion from a sector already taxed at 40% will achieve very little apart from making the North Sea – already one of the world’s most mature basins – less attractive to investors. Tax and fiscal stability, above all else, are what really matter in a globally competitive investment market, and today we’ve shot ourselves in the foot.
“It is clear that the Treasury has benefited enormously already from higher energy prices, to the tune of £19million per day so far this year, and therefore offering targeted support to consumers and businesses was already within its gift, without this damaging additional tax raid, which needlessly puts obstacles in our path to net zero and will increase our reliance on imported energy at a greater environmental and financial cost.”
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