Boris Johnson has come under increased pressure to introduce a windfall tax on oil and gas firms' profits amid the growing cost of living crisis. The prime minister has insisted that the government will "put our arms around people" despite declining to specify what support might be offered to struggling households and when.
The treasury appears to have rejected a return to the £20-a-week increase in Universal Credit which was initially rolled out during the coronavirus pandemic. Many MPs have brought a new wave of pressure on the Prime Minister, encouraging him to introduce a windfall tax to pay for a new measure to help poorer households cope with rising food and energy bills.
“No option is off the table, let’s be absolutely clear about that," Mr Johnson said. "I’m not attracted, intrinsically, to new taxes. But as I have said throughout, we have got to do what we can, and we will, to look after people through the aftershocks of Covid, through the current pressures on energy prices that we are seeing post-Covid and with what’s going on in Russia and we are going to put our arms round people, just as we did during the pandemic.”
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He added that there was "more that we are going to do" but "you'll just have to wait a little bit longer". The £20 uplift to Universal Credit was scrapped in October and was seen as a way of targeting help at the poorest in the UK.
Michael Lewis, chief executive of energy giant E.ON UK, said on Sunday that increasing benefits payments would ease the pressure on those facing skyrocketing energy bills accompanied by soaring inflation. Despite this suggestion, it was ruled out by treasury chief secretary Simon Clarke.
He told BBC Radio 4’s Today programme: “On that question, we were always explicitly clear that was a temporary response to the pandemic. That is not going to return. The question is how we best now look at the next range of solutions to deal with the challenges we’re facing.”
His reasoning included the fact that Chancellor Rishi Sunak had already lowered the taper rate for Universal Credit - the rate at which benefits start to reduce as a claimant earns money - allowing the lowest earnest to keep more of their wages.
“We took decisive action back in December with the change to the taper rate, that is to say the rate at which benefits are withdrawn as people’s earnings rise, and we cut that from 63p in the pound to 55p in the pound,” he added.
“That’s a tax cut worth an average of £1,000 to two million of the lowest earners in society.”
He described the taper rate decision as "precisely the kind of authentic Conservative solution to this question that we want to see”. While pressure for a windfall tax is mainly coming from the Labour side of Parliament, some senior Tories have also backed the initiative.
Conservative MP and former Treasury minister Jesse Norman, pointing out that former prime minister Margaret Thatcher used windfall taxes during her tenure in No 10, told Today: “A windfall tax justification in part rests on the widespread need that we are going to need to support people, and recognition of that. And we’re going to do that, I hope, quite comprehensively, because that’s what’s going to be needed.”
Mr Clarke told LBC: "“The sector is realising enormous profits at the moment. If those profits are not directed in a way which is productive for the real economy, then clearly all options are on the table.
“And that’s what we are communicating to the sector, that we obviously want to see this investment, we need to see this investment. If it doesn’t happen, then we can’t rule out a windfall tax.”
He told ITV’s Good Morning Britain that the UK Government is “not going to rush into action” but suggested support will be forthcoming given the “severity of the situation”.
Speaking to BBC Breakfast, he added: “Philosophically, I don’t want to be raising taxes but nor obviously can we ignore the fact that there is a very challenging situation in terms of the cost of energy at the moment that will likely worsen ahead of next winter, and the Government is going to need to take action to address that."
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