UK slaps one-off tax on oil and gas giants to ease the pain of soaring household energy bills

Sunak previously described the idea of a windfall tax on oil and gas majors as “superficially appealing” but a decision that would ultimately deter investment.

The U.K. Finance Minister has imposed a windfall tax on oil and gas majors as the government scrambles to alleviate the country's worsening cost-of-living crisis.

The measures come a day after a deeply embarrassing investigation into parties at Downing Street and amid sustained pressure on the ruling Conservative government to do more as soaring inflation pushes up the price of everything from food to fuel.

Sunak said that the oil and gas sector is making extraordinary profits not because of recent changes to risk-taking or innovation, but because of surging global commodity prices driven in part by Russia's war.

Sunak said that he was sympathetic to the argument to tax those profits fairly.

Sunak said the government is imposing a temporary targeted energy profits levy with an investment allowance to encourage oil and gas firms to invest their profits. The profits of oil and gas companies will be charged at a 25% rate before being phased out when commodity prices return to normal levels.

The decision to impose a windfall tax on energy companies marks another U-turn for the government of Prime Minister Boris Johnson. Sunak had previously rejected the one-off levy, saying that it would ultimately deter investment.

The opposition wants the government to impose a one-off tax on energy majors to help fund a national package of support for households.

Britain's oil and gas giants reported huge quarterly profits earlier this month, as they benefited from surging commodity prices during Russia's onslaught in Ukraine. The government should tax their surplus cash.

Britain’s oil and gas giants BP and Shell reported huge quarterly profits earlier this month.

After months of government opposition, Sunak changed his mind on the policy.

It seems the Chancellor is finally being dragged kicking and screaming to a U turn, and four months late adopting Labour's call for a windfall tax on oil and gas producer profits.

Why has it taken so long? Families had to struggle and worry while he dragged his feet.

Sunak said that the economic situation is getting more serious because of soaring inflation.

The UK's annual inflation rate reached its highest level in 40 years last month as food and energy prices spiraled. The Bank of England expects inflation to go up later this year.

Sunak said around 8 million of the lowest income households will receive a one-off cost-of-living payment. The first payment will be sent to people's bank accounts in July and the second in the fall.

An extra winter fuel payment of 300 dollars and a one-off disability cost of living payment of 150 dollars were announced by the finance minister.

Sunak said that a £200 loan for energy bills now no longer needs to be paid back and that support for households was increased to 400.

Sunak said the total cost of cost-of-living measures would be 37 billion.

The head of Britain's energy sector regulator warned this week that a price cap on the most widely used consumer energy tariffs was set to increase in October.

The current level of 1,971 was a record-breaking rise of 700 when the cap was introduced last month.

The price changes we have seen in the gas market are a once-in-a- generation event, Ofgem CEO Jonathan Brearley told lawmakers on Tuesday.

The number of households in fuel poverty could double to 12 million if the price cap surge goes through. Fuel poverty is when a household can't afford to heat their home.

Campaigners have described the prospect of further energy bill rises this winter as a nightmare scenario, warning that only an emergency budget could solve the crisis gripping the world's fifth-biggest economy.

The End Fuel Poverty Coalition has estimated that if fuel poverty levels hit the limits predicted, thousands of additional winter deaths will take place among the elderly and vulnerable.

The injustice of it all is incredible, according to a researcher at the Environmental Change Institute at the University of Oxford.

We need an energy market that caters to the needs of the consumers, not the needs of the suppliers. This is, after all, a basic necessity, that is ultimately about life and death, as well as comfort, good health and child development.