The cash machines are whirring at oil giants, but the money is being sent to shareholders rather than households. That’s ludicrous when voters are trapped between a cost of living crisis and a looming climate disaster. On Thursday, Shell made a £8bn profit in the three months to September – taking its haul to over £25bn this year. The company will hand back money to shareholders by raising its dividend and a £3.5bn share buyback. Despite making record profits, Shell has not paid any windfall taxes because of a government-made loophole that allows the company to offset North Sea investments.
This farcical situation has come about because of the economics of the madhouse. In 2021, the UK offered the best profit conditions to develop offshore oil and gas fields. This made a mockery of claims that the country was leading a green revolution to reduce its carbon footprint. Big profits in fossil fuel companies when energy bills were rising made this situation unsustainable, and the government was forced to impose a “temporary targeted energy profits levy”. But it was riddled with get-out clauses.
Tackling the climate emergency requires a fight for social and economic justice. Tax is a weapon in this battle. Greenpeace has said that raising UK levels of taxation to the global average for oil and gas companies would raise an additional £13.4bn. This is a small price to pay for firms that are frying the planet. And it is the first step needed if Britain is serious about the Paris climate agreement to limit global warming to 1.5C above pre-industrial levels.
What’s also wanted are taxes on cash transfers to make sure that companies are not channelling money to their shareholders at a time of national economic crisis. The left-of-centre thinktank Common Wealth found that oil and gas companies have handed their owners almost £200bn since 2010. This cashflow ends up making the rich richer – and gives them a stake in the status quo. A windfall tax on big carbon would not harm retirement incomes as Britain’s main pension funds own less than 0.2% of Shell and BP shares.
Ministers should enact the proposal made jointly by the Institute for Public Policy Research and Common Wealth for a windfall tax on the share buybacks of FTSE-listed companies. This could generate £11bn – with Shell and BP alone making up nearly half that figure. The current economic model has been an enabler of catastrophic climate change and equally catastrophic inequality. To change this for the better, governments will need to apply the tax thumbscrews, not just make half-hearted appeals to altruism.
Rishi Sunak’s decision not to attend the Cop27 climate summit is a bad sign that he won’t prioritise the environment. Even worse is his idea that public debt ought to be falling as a share of the national economy. The pursuit of this irrational goal sees Mr Sunak looking to find £35bn. It should be easy to choose between cutting public services, which will damage growth, and taxing excessive energy profits that harm the planet and increase inequality. That these are “difficult decisions” for Mr Sunak is revealing about both him and the trouble in store for Britain.
