Splitting the Energy Bill | New Economy Foundation

While the world’s oil and gas giants have entered the game record profitfamily is getting ready expected The average household’s energy bill will rise to £4,266 a year by January.it’s a high pitch Last winter’s price cap, which is £1,277. Even compared to the current cap, which rose to £1,971 in April, an average household using energy is still facing a bill increase of £2,295 this year, or almost £200 a month.However, our current Prime Minister has recently returned from a holiday to preside over a zombie government While we await the conclusion of the Conservative Party leadership election. So far, the two potential contenders for the next prime minister have offered only vague promises.

Back in May, after a period of great stress from activist And the opposition, the government made a U-turn and ended up imposing a windfall tax on fossil fuel companies.then Prime Minister Rishi Sunak announced ​​​“energy profit tax”, increasing the tax paid by North Sea oil and gas producers by 25 percentage points. The Treasury estimates that the levy will bring in about £5 billion in additional revenue in the first year. However, the tax introduces a major loophole : Fossil fuel companies get 91p in tax relief for every £1 they invest in UK oil and gas extraction. A windfall tax loophole is currently incentivizing oil and gas giants to drill for more dangerous fossil fuels in the UK. This has led to companies plan development new oil field Otherwise, you will not be able to get enough profit.

Not only did the government choose to undercut its own taxes with these tax breaks, but it also decided to offer tax breaks for the harmful expansion of new fossils just months after hosting the Cop26 international climate summit.Drilling for new oil and gas is Incompatible with reducing carbon emissions fast enough Net zero by 2050. The tax is badly designed to allow fossil fuel companies to retain a significant portion of their supernormal profits while millions of households worry about how they can afford to heat their homes this winter. By addressing these deficiencies, the government can further raise substantial revenue to support struggling families.

The government has yet to reveal the full cost of its energy profits taxation, and it is unclear whether the expected £5bn revenue will be net or gross after taking into account the accompanying tax relief. These figures were likely calculated based on oil and gas prices at the time of introduction.Given the price of British gas doubled Crude oil prices continued to rise between the end of May and the beginning of August (from £1.82 to over £3.70 per heat), is expected to remain so Over the next 12 months, even in its current form, the increase in government tax collection could be much larger than expected.

Established Work HMRC, after considering the price increase per unit of oil and gas since the OBR March forecast Until early August, we recommend that the government raise the collection rate of energy profits. Raising the windfall tax, which applies to all profits, by 20 percentage points (to 45%) and closing the loopholes introduced by the government could raise £14.3bn next year. This would be £9.3bn more than the initial forecast of £5bn raised through the levy. This will almost triple the money the government can raise from fossil fuel companies making excess profits, which can be used to support households struggling to afford energy this winter. The calculations are based on central estimates of oil and gas price forecasts for the next year. Combined with other taxes paid by the oil and gas giants, an increase in windfall profits would mean an overall tax rate of 85% on profits. We estimate this will return oil and gas companies’ after-tax profits to pre-pandemic normal levels. These are still huge sums, estimated at £4.8bn.

The scale of the crisis is such that any meaningful government intervention could support everyone through the winter Will cost over £30 billionAs a direct consequence of this price shock, higher taxes on the extraordinary profits generated by companies can and should be used to protect households this winter.If prices remain high for the foreseeable future, analysts forecastthe case for locking in this windfall over the course of the decade has become more convincing.

The surge in oil and gas prices is largely driven by changes in international markets. But while the UK can do little to lower gas and oil prices, it has powerful tools to mitigate the impact of sky-high energy bills.In the medium and long term, our priority should be to expand investment in renewable energy and through mansion upgrade. But now, we need urgent support for struggling households and individuals, while dealing with profiteering energy producers. The current prime minister may be asleep at the wheel, but whoever becomes the next should start with a higher windfall tax to ensure fossil fuel companies pay what they owe. This way we can make sure everyone stays warm this winter.

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