Windfall tax on energy firms wins support from MPs but government resists

Labour has said that scrapping VAT from energy bills for one year, while increasing the 'Warm Homes' discount to 9.3 million people, would alleviate the anticipated extra costs imminent for the poorest people. The average household would pay £200 less on their bills if the government adopted Labour’s plans, the party said.

Labour’s motion for a new tax on the profits of North Sea producers to fund a support package for families and business was approved in the Commons last night by 192 votes to zero, majority 192.

However, Conservative MPs abstained and the government is not compelled to act by the result given that the motion is non-binding.

The division list showed five DUP MPs, the Green Party’s Caroline Lucas (Brighton Pavilion) and Alliance’s Stephen Farry (North Down) were among those to back Labour's proposal.

Opening Labour’s opposition day Commons debate, Ed Miliband, shadow climate change secretary, claimed there has been “silence” from the government about how to ease the pressure on millions of families.

He said: “There can be no greater evidence of a government paralysed by inaction. Millions of families who want reassurance instead subject to the spectacle of a rule-breaking Prime Minister still too distracted by trying to save his own skin.

“Our case today is that millions of struggling families should not be left to face the situation alone and that we should do all we can to act and it is right to look to those benefiting from this crisis to make a contribution.”

Miliband quoted the words of Bernard Looney, BP's chief executive, who in November 2021 referred to the company as a “cash machine” as it benefited from soaring oil and gas prices.

He said: “Those were his words. A cash machine. Let’s be clear who is on the other side of the cash machine, it is the British people. In other words an ATM where the oil and gas companies claim billions and the British people pay.

“Let us not fall for the argument which may be made in this debate that it is somehow going into investment, or to workers in the oil and gas sector.

“All the evidence is that the companies are so flush with cash that billions of it is being used to inflate the share price in buybacks from shareholders.”

Conservative former Cabinet minister Sir John Redwood urged ministers to “think again” as he claimed the national insurance rise will be hitting people on their work incomes.

Sir John warned: “April could indeed be the cruellest month this year if more action is not taken to tackle the forthcoming problems, where we are likely to see an unfortunate coincidence of a big surge in electricity and gas bills as the cap is relaxed, increase in council bills, a general inflation which is a bit too high, and a national insurance increase hitting people on their work incomes.

“And I would urge the government to think again about the possible severity of that squeeze on real incomes, because it would have a knock-on effect, reducing people’s ability to spend on other discretionary items as they struggle to pay the energy bills and it will therefore slow the economy quite considerably at the same time as creating this shock on living standards.”

SNP business spokesman Stephen Flynn (Aberdeen South) argued that his constituents could lose their jobs – in the oil and gas industries and affiliated businesses – as a result of the proposed windfall tax.

Business minister Greg Hands said of Labour’s proposal: “Their solution is again to hammer domestic UK continental shelf production, increase imports, reducing our energy security and increasing our emissions at the same time.

“Labour’s approach is confused and misguided, it’s not a plan, it’s a motion, less energy security, higher emissions, higher fuel bills, and I urge the House to stick with our approach – North Sea transition, support for households and the UK remaining open for business.”

However, the government faced criticism of low turnout from Conservative MPs to debate Labour’s proposals to help households with the energy price rises.

SNP climate change spokesman Alan Brown said: “For the Tories, they only now seem to agree that there is a cost of living crisis, having done nothing about it, and now use it as their excuse that this cost of living crisis is why the Prime Minister needs to stay in his place having done nothing about it.”

Labour’s Tahir Ali (Birmingham, Hall Green) spoke of a “significant squeeze in the standard of living for millions of families who are seeing more and more of their hard-earned wages absorbed by gas and oil companies”, adding that the situation is “unsustainable”.

Ali added: “It is high time that we began to redistribute the massive wealth built on the back of consumers who have no other choice but to pay the ever higher prices for energy bills.”

Earlier this week, Prime Minister Boris Johnson hinted that Chancellor Rishi Sunak was preparing an announcement on how the government plans to “abate energy costs”, ahead of the dreaded significant rises for energy bills looming in April.