SNP propose broad windfall tax on ‘excess profits’

SNP spokespeople were challenged a number of times over whether the call for a windfall tax on companies included energy companies, but did not answer the question directly. Comments by the party’s deputy leader at Westminster suggested that while the oil and gas sector would not be singled out for the levy, neither would they be exempted if they were earning ‘excess profits’. The motion was successful but is non-binding on the Government.

Opening speeches

Shadow SNP Spokesperson on Business, Energy and Industrial Strategy Stephen Flynn (photographed below thanks to Parliament UK) opened the debate by expressing disappointment at the Government’s ‘buy-back loan of £200 for energy bills’, saying he wants to see a ‘turbocharging’ of investment in renewables, an energy security strategy and reversal of the national insurance price hike which he said is ‘a tax that will impact not just households, but businesses, too’. The Treasury believes it is going to take more than £3 billion extra in tax yield in relation to oil and gas, due to the increase in the price of oil, the MP observed. Every single penny of that £3 billion should be directed towards the provision of support for families, he argued.

By contrast with the UK, Flynn said the Scottish Government offer Scots free bus travel, free prescriptions, free meals for primary school pupils and a £20 Scottish child payment.

He called for a ‘broad windfall tax’ on companies that have ‘benefitted to the tune of billions of pounds’ from the pandemic, such as, he said, Serco, Amazon, Netflix and Asos – but he did not mention any energy companies. He said the tax should be “one that takes into account the changing landscape in the UK and globally so that we can respond to it to provide people with the support that they so badly need, and which is so badly overdue.”

Conservative John Redwood intervened to say the UK needs to get a lot more gas and oil out of the North Sea, which would generate tax revenue that the Treasury could use to ease the squeeze, instead of paying huge sums of money to Qatar and Russia for liquefied natural gas.

Speaking for the Government, the Exchequer Secretary to the Treasury, Helen Whately, said global factors are the main drivers of higher inflation in the UK and the Government is acting on the impact of escalating energy costs with measures such as winter fuel payment, cold weather payments and warm home discount.

On VAT on energy bills, Whately said domestic fuels such as gas and electricity are already subject to a reduced VAT rate of five per cent but a further cut to VAT on energy would disproportionately benefit wealthier households. There would also be no guarantee that suppliers would pass on any reduction to all customers, and the cut would become a permanent subsidy, worth £2.5 billion every year, at a time when we are trying to rebuild the public finances, she said. On the NICs rise, she said it is vital to reduce NHS backlogs. She said the Government providing a repayable £200 reduction in energy bills and £150 non-repayable council tax rebate is ‘fiscally responsible’. She added that the impact on global energy prices of Russia invading Ukraine is not going to hit most households’ energy bills over the coming months but maybe by October. Separately, she said additional funding was allocated to the devolved administrations to help with some of the issues Flynn complained about.

John Redwood intervened again to remark that over the last year, the economy has grown a lot faster because the Treasury did not ‘hike tax rates’ but instead went for growth. He said: “That was a great policy, so why reverse it? Is there not a danger that these tax rises and massive increases in energy prices will slow the economy down too much? If that happens, the Government will have a revenue problem.”

Whately claimed the reduced universal credit taper rate and increased universal credit work allowances  ‘ensure that work pays’ and is ‘essentially a £2 billion tax cut for the lowest paid in society’. Next month, the national living wage is increasing by 6.6 per cent. Additionally the Government has doubled free childcare for eligible parents and introduced tax-free childcare, she said.

The DUP’s Jim Shannon called on the Government to follow Ireland and suspend VAT on fuel in the short term. Whately said there is already a lower VAT rate on fuel in the UK but getting rid of it altogether would disproportionately benefit wealthier households.

On Scotland, Whateley said on top of the energy bill support scheme, which applies there, the council tax measure in England means the Scottish Government are receiving almost £300 million more than would otherwise be the case.

On a windfall tax on North Sea oil and gas, she said the Government place additional taxes on the extraction of oil and gas, with companies engaged in the production of oil and gas on the UK continental shelf subject to headline tax rates on their profits that are currently more than double those paid by other businesses. To date, the sector has paid more than £375 billion in production taxes. The Government support the North Sea oil and gas sector and its role in our energy security and our energy transition. We must focus even more on boosting productivity, growth and investment across the UK.

Ian Murray, Labour’s Shadow Secretary of State for Scotland, said the Government should have backed Labour’s call to place a windfall tax on the oil and gas companies’ excess profits to reduce people’s energy bills. He argued that the ‘buy now, pay later scheme’ for people’s energy bills is simply ‘deferring the problem’.

Murray said by removing VAT on energy bills, ‘the Government would remove a regressive tax that affects the poorest the most’. But he criticised the SNP, saying Scots are facing the prospect of higher council tax bills, because for over a decade the Scottish Government have ‘decimated’ local government funding and spent 15 years promising to scrap the council tax – ‘a promise that they continue to break at every election’.

Murray said he was confused about what companies would fall under SNP’s windfall tax. While Whately had said that she was ‘sure that SNP members are talking about a windfall tax on the extraction of oil and gas’, Murray’s was less sure. He asked the SNP for clarification but, unenlightened, dismissed the motion as a “back-of-a-cigarette-packet plan designed to help solve a political problem for the Scottish nationalists—who do not want to back a windfall tax on oil and gas but will not even tell us in public if that is what their motion is intended to do”.

Other Conservative speeches

Neil Parish said putting a windfall tax on oil and gas companies would reduce their ability to invest but urges the Chancellor to look at taxing those companies more if they do not invest, and less if they do.

Scott Benton said there is a strong case to remove the cost of ‘green levies’ from energy bills, which could save households about £150 to £200 per year, on average.

Suzanne Webb said we must continue to support the North Sea oil and gas industry because the transition away from fossil fuels and towards renewable energy ‘will not happen overnight’.

Other SNP speeches

Stewart Hosie said hiking national insurance contributions, removing the universal credit uplift, and allowing energy companies to impose ‘brutal increases’ on people, shows a government out of touch with people. Why is VAT not being cut, when ‘presumably this is one of the actual benefits Brexit could offer us’.

Martin Docherty-Hughes said the UK Government must surely believe that increasing statutory sick pay in line with the real living wage, and removing the threshold and extending it to 52 weeks instead of 28, is long overdue given the traumas of so many during the pandemic.

Anum Qaisar said Trading Standards Scotland is reporting an increase in illegal money lending as people try to deal with increasing energy costs, rising food prices and cuts to universal credit. The SNP want the £200 energy loan turned into a grant.

Chris Stephens said he will ask for an inquiry on why the DWP website is advertising jobs that pay less than the national minimum wage. The DWP should, he says, refer itself to the national minimum wage compliance unit. Separately, he said deductions from benefits really have to stop because currently it leads to the ‘spiral of debt’. He said the Government pursuing tax credit overpayments that are decades old seems ‘complete nonsense’.

Owen Thompson is disappointed at the ‘betrayal of pensioners, the absolute wrecking ball of Brexit and the half-hearted commitment to green energy investment’ by the Government.

Plaid Cymru speeches

Ben Lake, Plaid Cymru, urged the Chancellor to support the Road Haulage Association’s call for an essential user category to be developed to reduce petrol prices for key services. Lake called the NICs rise ‘effectively a tax on employment’ and said Plaid Cymru supports the proposal to increase the employment allowance from £4,000 to £5,000 a year, as advocated by the Federation of Small Businesses.

He said an expanded relief to allow eligible employers to reduce their national insurance liabilities, would make widespread and welcome pay rises more financially sustainable for businesses, reduce the risk of higher costs being passed on as higher prices to consumers and protect businesses’ ability to invest.

Closing speeches

Winding-up the debate for the SNP, Kirsten Oswald, the party’s deputy leader at Westminster, called for scrapping VAT on energy bills and fuel and a fuel duty regulator to feed back to consumers the additional income received through price increases.

Trying to explain the scope of the SNP’s windfall tax, she said the Chancellor should ‘apply a broad-based windfall tax on excess profits of major companies, so that major organisations such as Amazon and other large retailers, as well as energy companies, can help to relieve the burden that millions of households face’.

Closing the debate, the Minister for Energy, Clean Growth and Climate Change Greg Hands also claimed confusion about what exactly is meant by the SNP’s proposed windfall tax and suggested it must include energy companies because this debate is about energy prices.

On Labour’s proposed windfall tax, Hands said that 82 per cent of oil and gas produced in the UK is produced in Scotland, which means that Labour’s windfall tax would very largely hit the Scottish economy. ‘A windfall tax could accelerate rising prices,’ he added.

Separately, he told Stephens that the Government takes enforcement of the national minimum wage incredibly seriously across Government and DWP ‘does have checks and, if it discovers any positions below the minimum wage, it will take them down.’

The transcript is here.

By Hamant Verma, CIOT Senior External Relations Officer