The Chancellor also confirmed that the existing contingency tax on North Sea oil and gas operators, the Energy Profits Levy, would be increased from 25% to 35% and extended by two years, until March 2028. He said the tax would be extended from January 1 to apply to “low-carbon electricity producers”, which include wind, solar and nuclear generators, and would be levied at 45%. 40% was expected. Hunt said he expected the two taxes to raise £14bn next year. Shares in power station owners Centrica, Drax and SSE fell sharply moments after Hunt’s announcement. Oil and gas inventories were broadly unchanged. The chancellor said most countries were still paying for the consequences of the pandemic and that this had been exacerbated “by a Russian-made energy crisis”. He said energy prices have risen to eight times their historical average. He had “no objection to windfall taxes if they involved real windfalls caused by anticipated conditions in energy prices. Any such tax should be temporary, not deter investment and recognize the cyclical nature of energy businesses.” Treasury officials are understood to be meeting energy bosses on Friday to discuss the proposals. Rising gas prices, fueled in part by Russia’s invasion of Ukraine, have delivered a windfall of profits for oil and gas companies and producers, including nuclear plants and wind farms with older contracts. Officials have spent more than six months considering ways to tax power generators, some of which have enjoyed big profits from soaring energy prices — linked to rising wholesale gas costs, even for renewables like wind and solar – while their costs remained largely stable. The companies argued that a tax on generators could discourage investment in green energy and would be difficult to design fairly because many companies had sold most of their power up front, reducing their windfall. However, the levy on energy profits has been criticized as not extending to the excess cash generated by the oil and gas giants’ trading, refining and offshore divisions. Hunt did not change the levy to arrive at these windfalls. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. Alice Harrison, head of the fossil fuels campaign at Global Witness, said: “The British public have every right to be angry when just a few weeks ago BP and Shell announced combined profits of £15bn in the third quarter of this year alone . “This so-called tax and budget windfall is nowhere near what is needed to protect UK citizens being pushed into poverty and barely touches the sides of the vast profits that energy companies have raked in.” Hunt confirmed during his speech that the energy crisis had added £150bn to bills this year. The move to cap profits on power generation represents a departure from former prime minister Liz Truss’ plan to limit the revenue of renewable and nuclear power producers from next year under the EU’s “revenue cap”. The government has drawn up plans to move companies on a voluntary basis to contracts for difference, which limit their income but guarantee them a long-term income. However, industry sources said negotiations had stalled in recent weeks and the plan would not be implemented immediately.
