Ed Miliband has said it “beggars belief” that the government is opposing a windfall tax on oil and gas companies on the grounds that they are struggling, after Labour proposed a £1.2bn levy on producers to help households and businesses with soaring bills.
The shadow secretary for climate change and net zero and former shadow business secretary said there was “no greater proof that this government’s incompetence and weak leadership is costing millions of hard-working families”, as energy producers have been making near-record profits because of soaring wholesale gas prices that are driving up bills.
Rachel Reeves, the shadow chancellor, set out her plan over the weekend for a £1.2bn tax on producers to fund a £200-average cut to household bills, plus £600 of targeted support for those most in need, but on Sunday the government dismissed this as a solution.
Nadhim Zahawi, the education secretary and a former oil industry executive, told LBC radio: “What Labour are putting out just doesn’t add up. A windfall tax on oil and gas companies that are already struggling in the North Sea is never going to cut it.”
The government has been holding talks with energy bosses before a decision by Ofgem due in February about whether the price cap on bills needs to rise from April to cover the cost of soaring gas prices. However, ministers currently favour some support targeted at the lowest-income families rather than a VAT cut for all, and now appear to have rejected the idea of a windfall tax.
Miliband told the Guardian: “This clear confirmation that the Conservatives oppose the windfall tax tells you exactly whose side they are on – and it’s not the British people struggling with their energy bills.
“It beggars belief that a cabinet minister believes that we should prioritise oil and gas companies making huge windfall profits that he says are ‘struggling’, rather than the British people who face the true struggle to pay their energy bills.
“It is fair and right to ask these companies to make a one-off extra contribution to help so many people who are facing appalling hardship.”
After the proposal for a windfall tax to pay for the VAT cut, Labour made a new call for a £600m government fund to help businesses deal with soaring fuel bills, also funded by the windfall tax. The party will on Tuesday force a vote in parliament on support for businesses hit by energy prices rises, calling for the government to scrap business rates, reduce the debt burden that firms are facing and create the £600m contingency fund.
Boris Johnson is under some pressure from his own backbenchers to take action over the issue of energy costs hurting households, but there is a split between the right of the party who want to remove green levies and defenders of the net zero strategy who propose carbon taxes on industry.
Chris Skidmore, the Tory MP for Kingswood and a former energy minister, told Channel 4 News: “A windfall tax, whether you call it that or you want to call it a carbon tax – [what] I would rather talk about is how we achieve a carbon tax for the future – is absolutely, I think, the right way to go.”
The Conservative MP has launched a “net zero support group” to defend efforts to decarbonise the economy against some of his colleagues who are claiming it costs too much.