We are still waiting for Liz Truss’ and Kwasi Kwarteng’s “special fiscal operation” which will bypass much of the analysis and scrutiny a formal budget gets. – Owl
Alexandra Rogers www.huffingtonpost.co.uk
The EU is planning to bring in a windfall tax on energy firms so their huge profits can be “shared and channelled to those who need it most”.
Ursula Von der Leyen, the European Commission president, said it was “wrong” for companies to make “extraordinary” profits on the back of consumers and the war in Ukraine.
The move is in stark contrast to the approach taken by Liz Truss, who last week ruled out bringing in a fresh levy on the companies’ excess profits.
The EU is also proposing to cap the revenues of electricity-producing companies that are making extraordinary profits thanks to the war in Ukraine and climate change.
Von der Leyen told the European Parliament in Strasbourg that the proposal could raise 140 billion euro (£121 billion) to help people hit by spiralling energy prices.
During her state of the European Union address, Von der Leyen said: “These companies are making revenues they never accounted for, they never even dreamt of.
“In our social market economy, profits are OK, they are good.
“But in these times it is wrong to receive extraordinary record revenues and profits benefiting from war and on the back of consumers.
“In these times, profits must be shared and channelled to those who need it the most.”
She added: “And because we are in a fossil fuel crisis, the fossil fuel industry has a special duty, too.
“Major oil, gas and coal companies are also making huge profits. So they have to pay a fair share – they have to give a crisis contribution.”
The EU’s intervention is likely to lead to increased calls for a further windfall tax on UK firms.
A windfall tax on the UK’s oil and gas sector introduced on May 26 remains in place but there have been calls from Labour for it to be extended due to the worsening economic situation.
In her first week as prime minister, Truss unveiled a £150 billion package to cap energy bills at £2,500 for the next two years, saving the typical household £1,000 a year.
The policy has been welcomed as a much-needed intervention but the funding of it — through government borrowing — has been criticised by those who do not believe the taxpayer should shoulder the burden.
During prime minister’s questions last week, Truss ssaid she was against a further windfall tax when challenged by Keir Starmer.
“I believe it is the wrong thing to be putting companies off investing in the United Kingdom, just when we need to be growing the economy,” she told the Labour leader.
The 27 member states that make up the EU are also struggling with the cost of living crisis that has taken hold in the UK.
Since the outbreak of Russia’s invasion of Ukraine, EU member states have sought to wean themselves off Moscow’s exports, which in turn has pushed prices up as demand for other supplies intensifies.
Russia has already cut gas supplies partially or entirely to 13 member countries in response to the EU’s decision to impose sanctions of Moscow for its continuing aggression against Ukraine.
In her speech, Von der Leyen said there needed to be a “deep and comprehensive reform of the electricity market” to reduce the influence of natural gas on the way that prices are set.