The Labor Party is calling on the government to introduce a windfall tax on gas and oil firms, as millions of UK households face a sharp rise in energy bills this spring.
Today (February 1st), Labor will put forward a motion in Parliament proposing that energy producers are subject to a one-off windfall tax, amid surging wholesale energy prices.
Last month, energy secretary Nadhim Zahawi publicly rejected the idea, telling LBC that gas and oil firms were “already struggling in the North Sea”.
READ MORE: Energy prices: why they’re rising, how much they’ll increase in April – and what Martin Lewis says about fixing prices
What is a windfall tax?
A windfall tax is a one-off tax on profits or earnings that are considered excessive. It is intended to raise revenue that can then be put towards other purposes – such as dealing with the impending rise in household energy bills.
Labor argues that oil and gas firms stand to make huge profits at a time when UK households and businesses face eye-watering increases in their energy bills, and that they should be taxed on these profits.
Wholesale gas prices in particular have surged in recent months, with demand for energy spiking across Europe.
Britain has been left particularly vulnerable to fluctuations in wholesale prices because it has no long-term gas storage facilities. The Rough storage facility, in the North Sea, was shut down by Centrica in 2017.
Labor says a one-off windfall tax on energy producers would raise £1.2 billion which could then be put towards helping households address their soaring energy bills.
It also wants to see the government suspend VAT on energy bills – currently levied at 5% – while expanding the Warm Homes Discount.
How much will household bills go up in April?
Household bills are expected to rise sharply from April 1st. Ofgem, the energy industry regulator, looks set to raise its energy price cap – which it will review this month.
Energy industry analysts have warned that UK households could soon be faced with energy bills of around £2,000 a year when the cap is lifted.
Ofgem raised its energy price cap twice in 2021 – once in April and again in October – and energy suppliers have been lobbying intensely to get it increased again, or scrapped entirely.
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