Windfall tax on UK oil and gas companies will increase by $ 6.3 billion

Finance Minister Rishi Sunak has unveiled a new 25% tax on the profits of fuel producers, e.g. BP (BP) And Shell (RDSA) Thursday. The tariffs will be phased out once oil and gas prices return to normal, he said.

“The oil and gas sector is making tremendous profits, not as a result of recent changes, risk-taking or 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 about £ 15 billion ($ 19 billion). Sunak said the government would provide one-time direct payments to millions of people in the country’s most vulnerable families. About eight million low-income families will receive £ 650 in two installments later this year, while another 8 million pensioners will receive £ 300.

Companies including BP and Shell racked up a combined 32 Billions in profits last year on the back of rising global oil and natural gas prices. Russia’s aggression in Ukraine in February has pushed up prices for fear of a power crisis.
Families have taken a big hit. On Tuesday, the head of the UK’s energy regulator said he expects the annual bills of millions of households to increase by 40% from October to about £ 2,800 ($ 3,500). Just six months after the regulator lifted its price cap – the top suppliers allow customers to charge per unit of energy – by 54%, the largest increase since the price cap began five years ago.

Rocket energy bills have fueled price increases across the economy. In April, UK consumer inflation hit a 40-year high of 9%. And as wages fail to keep pace with rising food and fuel costs, living standards have returned to their lowest level since the 1950s, according to the UK’s Office for Budget Responsibility.

Sunak delivered in February Some relief groups have been offering families a 200 rebate on their energy bills since October, which will be paid in installments over the next few years. On Thursday, Sunak doubled the discount and said nothing had to be returned.

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

The Financial Times reported earlier this week that the government will also look at bumper gains from major power generating companies such as EDF (ECIFY) and RWEY (RWEOY). However, Sunak said his department needed more time to come up with a plan for the power sector.

Poverty advocates welcomed Thursday’s move.

“The Chancellor has clearly heard concerns that support for fuel poverty needs to be both broad, but also focused on the most at-risk groups,” Simon Francis, coordinator of the End Fuel Poverty Coalition, told CNN Business.

Francis added that the new measures would “sting out” the recent rise in energy prices, but that those in energy poverty needed more reassurance that support would be found in the medium term.

Mark Thompson Contributing Reporting.

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