Windfall tax could save households money as energy bills rise

Cost of living: Couple outline 'significant impact' of energy bills

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Britons are currently experiencing an unprecedented hike in their energy bills as the cost of living crisis continues. As of October 1, the average household has seen its costs rise by 27 percent which is lower than previously expected thanks to the Government’s price guarantee. Through this Government policy, the typical price of a unit of gas and electricity is capped which means a household with average usage will cost £2,500.

However, experts are concerned about the Government’s decision to forgo implementing a tax on energy suppliers to mitigate the cost on taxpayers.

Speaking in the House of Commons last month, Liz Truss said: “I am against a windfall tax. I believe it is the wrong thing to be putting companies off investing in the United Kingdom.”

The previous Chancellor Rishi Sunak implemented a 25 percent tax on the profits of oil and gas produced in the UK to pay for his cost of living initiatives.

This decision is expected to raise £28billion in the coming years, however the new Chancellor Kwasi Kwarteng failed to introduce a similar measure in last week’s mini-Budget.

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A windfall tax has been deemed necessary by experts as gas and electricity providers are forecast to make excess profits totalling £170billion over the next two years, according to the Treasury.

Outside of the issue of rising energy prices, the country is dealing with continuing high levels of inflation which is currently at 9.9 percent.

Concerns have been raised that Prime Minister Liz Truss’ fiscal policies, introduced last week, could be inflationary which will add further financial stress to millions of Britons.

In light of this, personal finance experts are urging for an expansion of the windfall tax to be considered to save taxpayers money down the line.

Julian House, a personal finance expert and managing director of www.myfavouritevouchercodes.co.uk, outlined how a windfall tax could be beneficial to households.

Speaking exclusively to Express.co.uk, Mr House explained: “One of the biggest talking points of Liz Truss’ new ‘Energy Price Guarantee’ initiative is the lack of any windfall tax on energy companies.

“When a company stands to gain from an unusual spike in demand or interruption to supply, the Government can implement a one-off, higher tax rate on profits – called a windfall tax.

“Both of these conditions currently apply to the energy industry, with a huge spike in the demand for energy as we shift to a post-pandemic world and major interruptions to our energy supply caused by Russia’s invasion of Ukraine.

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“Energy companies such as BP and Shell are currently enjoying record profits in the face of the energy crisis, leading to calls from many to implement a windfall tax to help fund monetary support for UK citizens and everyday taxpayers.”

Consumer champion Will Hodson, the founder of How to Save It, emphasised that a windfall tax would be “right and proper” considering the circumstances.

On the Government’s decision, Mr Hodson said: “There was a choice. You could say we’re putting it all on the taxpayer, for the years ahead.

“By tax in years ahead, we mean younger people who are relatively worse off as it is or you could look to extend the reach of the windfall tax.

“To me, it seems only right and proper, if you’re looking for support for people who have been absolutely smashed by this energy crisis, you should look to those organisations, which have done extremely well out of that very same energy price crisis.

“I’m talking about energy producers. Companies, like Centrica, who have seen their profits increase six fold in 2022, relative to where they were a year before.

“That increase in profits is not because of innovation, or derring-do or anything that we might want to encourage with a free market Government or entrepreneurial society.

“That increase in profits comes entirely from the conflict in Ukraine and the broader crisis in the gas wholesale market. Speaking as an entrepreneur, I have no issue with an increased tax for energy producers under those circumstances.”

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