June 28, 2022

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UK windfall tax increase on oil and gas companies $6.3 billion

Why Europe is vulnerable to surging energy costs
Finance Minister Rishi Sunak has unveiled a new 25% tax on the profits of energy producers such as BP (BP) And coincidence (RDSA) Thursday. He said the tax will be phased out once oil and gas prices return to more normal levels.

“The oil and gas sector is making exceptional profits not as a result of recent changes, risk-taking, innovation or efficiency, but as a result of rising global commodity prices,” Sunak said in a speech to parliament.

The tax will help fund a new package of benefits worth around 15 billion pounds ($19 billion). Sunak said the government will provide one-time direct payments to millions of the country’s most vulnerable families. About eight million low-income families will receive £650 in two payments later this year, while another eight million retirees will receive £300.

The companies, including BP and Shell, made $32 billion dollars last year on the back of the global rise Oil and natural gas prices. Russia’s invasion of Ukraine in February sent prices even higher due to concerns that the conflict could lead to energy shortages.
Families have been hit hard. On Tuesday, the head of the UK’s Energy Regulatory Authority said he expects annual bills for millions of households to jump 40% to around £2,800 ($3,500) from October. This is only six months after the regulator raised the price ceiling – The maximum number of suppliers are allowed to charge customers per unit of energy – at 54%, the largest increase since it began setting prices five years ago.

The skyrocketing energy bills led to price hikes in various sectors of the economy. In April, UK consumer price inflation hit 9% – its highest level in 40 years. As wages fail to keep pace with rising food and fuel costs, living standards have fallen to their lowest level since the 1950s, according to the UK’s Office of Budget Responsibility.

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In February, Sunak . presented Some relief, as it offers families a £200 discount on their energy bills from October, which were due to be paid in installments over the next few years. On Thursday, Sunak doubled the discount and said there was no need to get anything back.

“This support is now unequivocally a grant,” he said.

The financial times I reported earlier this week that the government will also target bumper profits for major electricity generating companies such as EDF (ECIFY) and RWE (Roy). But Sunak said his ministry needed more time to come up with a plan for the electricity sector.

Anti-poverty activists welcomed Thursday’s actions.

“The chancellor has clearly heard concerns that support for those struggling with fuel poverty should be widespread, but also focused on the most vulnerable,” Simon Francis, coordinator of the End Fuel Poverty Coalition, told CNN Business.

Francis added that while the new measures would “remove the sting” from recent energy price increases, people struggling with fuel poverty need more reassurance that support will be available in the medium term.

Mark Thompson contributed reporting.