Energy companies could face a windfall tax if they do not reinvest their bumper profits, a government minister has said as he acknowledged the “extraordinary pressures on family finances”.
Simon Clarke, chief secretary to the Treasury, told Sky News’s Kay Burley that imposing such a levy could not be ruled out and that “all options are on the table”.
It appeared to be the strongest hint yet from the government that a windfall tax, first proposed by Labour and which would be used to help offset soaring energy bills, could be adopted.
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However it is understood that the prime minister and other members of the cabinet are yet to be convinced.
Mr Clarke told Sky News’s Kay Burley that the government recognised the “real challenge for households up and down the country” which is likely to worsen again in the autumn when the energy price cap rises again.
He added: “On the concept of a windfall tax itself, we are very very clear that there is a real need at a time when the industry is making very significant profits to see those profits reinvested in new offshore installations – getting more out of the North Sea, which is obviously vital in terms of energy supply but also good for jobs and the wider economy.
“If we do not see that investment materialise then we are very clear that all options are on the table.”
The comments come after Jesse Norman, the former Treasury minister, became the latest Tory MP to embrace the idea of a windfall tax given the “extraordinary times” and arguing that Mrs Thatcher “in her pragmatic prime” would have backed it.
George Osborne, the former chancellor, told Channel 4’s Andrew Neil show on Sunday that he believed Rishi Sunak would eventually do so.
Mr Clarke’s comments about the option not being off the table echo those previously made by Mr Sunak and other ministers.
It comes at a time when the energy companies are enjoying big profits thanks to surging oil and gas prices even as that surge is squeezing household finances – and largely responsible for driving inflation to its highest level in four decades.
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Mr Clarke told Sky News that Mr Norman had made a “very powerful point” about the idea of a windfall tax.
“We are certainly not ruling it out,” he said.
“I’m not ever instinctively drawn to increasing taxes in so far as it risks deterring investment in new capacity and new jobs – but these are extraordinary circumstances, we recognise there are extraordinary pressures on family finances, and the industry needs to hear the message loud and clear.
“If investment doesn’t go in then we can’t rule out having to do a windfall tax.
“We’re not at this point making any announcement but we’re not ruling it out.”
If the companies do not make the investment in the North Sea that is needed it would mean they are “in effect just banking the profits and not doing anything to justify those”, Mr Clarke said.
“These are effectively one-off and extraordinary gains for the industry,” he added.
Labour leader Sir Keir Starmer last week accused the prime minister of dithering over the imposition of a windfall tax – a policy he suggested that the government will eventually have to enact.
Splits have emerged between Boris Johnson and Mr Sunak over the proposal.
Sky News understands that Mr Sunak regarded it as unhelpful that Tory MPs were ordered to vote in the Commons against the policy.
Abena Oppong-Asare, Labour’s shadow exchequer secretary to the Treasury, called for more urgency.
She told Sky News that she had constituents unable to afford to take the bus to go to the food bank or job centre.
“I was disappointed to hear from Simon Clarke that they were waiting to see from the gas companies in terms of showing leadership on this… it’s just a no-brainer in terms of the fact that the government should get on with it,” she said.