The extraordinary tax announced by the chancellor will be “detrimental” to the UK’s zero net energy and energy security plans, the British Confederation of Industry (CBI) has said, while BP has said the measure is tougher than it is. ‘I expected.
Rain Newton-Smith, chief economist at CBI, said the tax “sends the wrong signal to the whole industry at the wrong time,” pointing to a “backdrop of rising corporate taxation.”
Chancellor Rishi Sunak said oil and gas companies will pay a 25% profit tax, which will be phased out when energy prices return to normal, but companies will receive a 90% tax cut. for any benefit they invest. The funding will be used to help families with rising energy bills.
Last Cost of Living: Martin Lewis responds to Sunak’s announcement
Oil and gas companies are being attacked because they have enjoyed excellent profits as a result of rising energy prices.
However, these companies also suffered at the height of the COVID crisis, as oil demand, and therefore prices, fell.
Ms Newton-Smith said the government should work with companies on a “genuine” plan to increase investment and “revive growth, especially in areas such as energy efficiency”.
“Despite the incentive to invest, the indefinite nature of the energy tax, and the potential to bring electricity generation within reach, will be detrimental to the investment needed for energy security and zero net ambitions, ”he said.
BP, which had announced an £ 18bn investment earlier this month over the next eight years to bolster national energy security, gave a cautious response to the move.
A spokesman said: “We know how difficult things are for people across the UK right now and we recognize the need for government action.
“As we have said before, we see many opportunities to invest in the UK, in today’s energy security and tomorrow’s energy transition.
“Today’s announcement is not for a single tax, but a multi-year proposal. Naturally, we will now have to look at the impact of both the new tax and the tax cut on our investment plans. in the North Sea “.
Shell said the tax cut on investments is a “critical principle in the new tax.”
“We have consistently stressed the importance of a stable environment for long-term investment,” a spokesman said.
“This is critical to our goal of investing between £ 20 billion and £ 25 billion in the UK over the next decade, mainly in low and zero carbon products and services, with a significant amount also focused on ensuring security. of the UK’s energy supply. “
Sam Alvis, chief economist of the Green Alliance climate think group, said the extraordinary income tax is “what needs to be done to help households.”
Use the Chrome browser to get a more accessible video player
5:22 What does Sunak’s plan mean for UK homes?
“It’s not the tax that will hurt the net zero, but potentially the accompanying investment bonus,” he told Sky News.
“There is nothing to stop this investment from going to volatile oil and gas, which is largely responsible for increasing people’s energy bills.
“The chancellor should use tax breaks and public investment to quickly expand the cheap and secure renewable energy we need to resolve this crisis.”
Use the Chrome browser to get a more accessible video player
1:53 Cost of living: £ 15 billion in support
“The chancellor has failed”
Green groups also said Sunak needed to go further to address the underlying issues fueling rising energy bills.
Shaun Spiers, chief executive of the Green Alliance, said: “Unless the transition from expensive gas to cheap renewables and energy-efficient homes is accelerated, the government will continue to be forced into emergency solutions.”
Listen and subscribe to The Ian King Business Podcast here.
Ed Matthew, campaign director for the independent think tank on climate change E3G, agreed: “The chancellor has been unable to resolve the underlying crisis.”
He said the unexpected tax should have been used in part to improve the insulation of the home, which would cause homes to heat up and reduce energy bills by up to 50%.
He said the UK has the worst-insulated homes in Western Europe, but that cannot be solved without more government funding, adding: “We will all pay the price for this missed opportunity.”