inflation | London taxes the oil giants to help households

The UK government has announced it will use a windfall tax on oil and gas companies to raise funds for direct payments to households, totaling a total of 15 billion pounds (about $ 24 billion), to alleviate the cost of crisis of living in the country.

Posted at 8:00 am

Eshe Nelson
The New York Times

Rishi Sunak, Chancellor of the Exchequer, announced measures on Thursday amid growing pressure on the government to help households cope with rapidly rising inflation and energy bills. Mr Sunak said oil and gas companies had benefited from rising global commodity prices, partly due to the war in Ukraine, and the money could be used to protect low -income households.

Oil and gas companies have to pay a 25% tax on their “extraordinary” income. This tax will be temporary and will be removed when energy prices return to normal, Sunak said. The tax will raise about £ 5 billion (about $ 8 billion) next year, about a third of the amount of direct payments to households, the Treasury estimates. As part of this new levy, there is an investment allowance that will help companies reduce their tax if they reinvest their profits in Britain.


Rishi Sunak, Chancellor of the Exchequer

“The oil and gas sector is earning extraordinary revenue,” Sunak told parliamentary lawmakers. “Not because of recent changes in risk taking, innovation or efficiency, but because of rising global commodity prices.

“So I support the argument that these revenues should be taxed fairly,” he added.

A diversion?

It has accused the UK government of being slow to announce more aggressive measures to support low-income households amid rising food and energy prices, leaving people to make poor choices and it often hurts how to spend their limited income. Now the government seems to be trying to divert attention from illegal parties to Downing Street, after the long -awaited report on the gatherings was released on Wednesday.

Britons are set to suffer one of the worst reductions in their disposable income in decades. Last month, Britain’s annual inflation rate rose to 9%, the highest in 40 years. Consumer confidence has plummeted. The central bank predicted high inflation would limit consumer spending and warned that Britain was in danger of recession.

On Thursday, Sunak detailed the payments, though many will not be sent until the end of the year. Each household will receive 400 pounds in October (roughly C $ 650). In addition, more than 8 million low -income households will receive 650 pounds (about C $ 1,050), which will be split into two phases in July and fall. Another 8 million pensioners already receiving help with their energy bills will get £ 300 by the end of the year, and 6 million people on disability benefits will get an additional £ 150 by September. Local councils also reportedly provided £ 500m (over C $ 800m) in October to help households.

In April, the price limit on household energy bills rose 54%, bringing the amount paid by 22 million households to about 2,000 pounds, or about C $ 3,200 per year. The government gave most households a £ 150 reduction in their bills in April and said it would offer another £ 200 reduction in October, to be paid over five years.

The government has increased this assistance, as fees are expected to increase further. This week the director of Ofgem, which sets the price cap, said the cap could rise by a further £ 800 in October. On Thursday, Mr Sunak said he would scrap the plan to pay the aid in October and double it to 400 pounds.

This article was originally published on The New York Times.

Leave a Comment