Lib Dems demand windfall tax on fossil fuel companies to support households this winter
Originally published by Folkestone and Hythe Liberal Democrats
Liberal Democrat Leader and former Energy Secretary Ed Davey has called for a windfall tax on gas producers profiting from record high prices, to help pay for support to struggling households and businesses this winter.
Gas prices have risen from 56p/therm during the first half of the year to 150p/therm and are now reaching 300p/therm. Over the past five years natural gas prices had never reached 100p/therm. Serica Energy, a North Sea gas company responsible for 5% of the UK supply, have already stated they expect "significant returns" due to the increase. Share prices in Sercia have surged from 156p per share at the end of August, to 232p on Wednesday.
Meanwhile, households and businesses are struggling with higher bills. The energy regulator, Ofgem, increased the energy price cap by £139 a year to £1,277 for the average household - coming into force this week. Energy experts predict the price cap could rise again by nearly £400 next year.
The Liberal Democrats are calling on the Chancellor to bring forward a year-long windfall tax on gas producers that are set to benefit from these record prices. The party estimates the one-off levy could raise between £5 billion and £10 billion. Spain has already pledged to bring in a windfall tax on its energy companies, due to raise an estimated £2.2 billion by March 2022 (€2.6 billion). In 2008-9, when oil prices were seeing a similar spike, the UK Treasury was able to raise more than £10 billion in oil and gas revenues.
The proceeds would be used to fund an emergency home insulation programme to upgrade poorly insulated UK homes - including through fully funded grants for those in fuel poverty and on low incomes.
Funding would also be set aide to support low income households with their energy bills during winter and provide temporary emergency support to energy-intensive businesses, especially smaller firms, who are in danger of closing down due to spiralling energy costs.
Ed Davey, Leader of the Liberal Democrats and former Secretary of State for Energy said:
"Fossil fuel companies are raking it in hand over fist through this gas crisis. The least they can do is pay a little more in tax to help struggling families get through the winter.
"This windfall tax would raise vital funding to insulate people's homes, slash energy bills and protect skilled jobs.
"If Rishi Sunak is serious about tackling both the climate emergency and the cost if living crisis, he would introduce this one-off tax."
Spain's GDP is $1,278,210 million, the UK's GDP is $2,710,970 million, meaning the UK economy is 212% bigger than Spain. Spain's windfall tax is expected to raise €2.6 billion by March 2022, meaning using the same calculation the UK would raise €5.5 billion or £4.6 billion.
- The price of natural gas has risen from around 45p/therm in October 2020 to more than 220p in Oct 2021. That's a rise of 490% - nearly 5 times.
- In 2008-9, when oil prices were seeing a similar spike, the Treasury was able to raise more than £10 billion in oil and gas revenues. The price of gas at the time was only around 80p per therm. And the rise in the price of oil was smaller in comparison to today's gas surge.