The UK government is raising a surprise tax on oil and gas companies and extending a levy on electricity producers as it tries to balance its budget amid an economic downturn.  It is also investing in nuclear power for the first time in decades.   

  UK Chancellor of the Exchequer Jeremy Hunt announced the measures on Thursday as he delivered the government’s medium-term budget, which set out plans for higher taxes and cuts in public spending.   

  From January 1, the tax on energy profits on oil and gas companies will increase from 25% to 35% and will remain in place until the end of March 2028. This brings the total tax on the sector to 75%, according to the Ministry of Finance .   

  There will also be a new, temporary levy of 45% on the surplus profits of electricity producers during this period.  In the UK, electricity prices are linked to wholesale gas prices, meaning many electricity producers also enjoy large profits.   

  Together, these measures will raise £14 billion ($16.5 billion) next year and more than £55 billion ($65 billion) between 2022 and 2028.   

  There have been growing calls in Britain for higher taxes on windfalls for oil and gas companies, which have enjoyed record profits this year thanks to a price hike due to Russia’s invasion of Ukraine.   

  At the same time, households and businesses are being squeezed by decades of high inflation as a result of rising energy and food bills.  The UK’s annual inflation rate rose to 11.1% in October, the highest level in 41 years.   

  “I have no objection to windfall taxes if they are real windfalls caused by unexpected increases in energy prices,” Hunt told parliament on Thursday.  “Any such tax should be temporary, not deter investment and recognize the cyclical nature of energy businesses,” he added.   

  The UK will spend an extra 150 billion pounds ($176.9 billion) on energy bills this year compared to pre-pandemic levels, according to Hunt.  This is the equivalent of paying for a second National Health Service.   

  Hunt on Thursday also extended government support for energy bills by another 12 months until April 2024, but said average households should expect to pay £3,000 ($3,451) a year, up from £2,500 ($2,951) today.   

  In addition to hiking energy taxes, Hunt confirmed a £700 million ($824 million) investment in Sizewell C, a nuclear power station operated by France’s EDF in eastern England.   

  The deal was first announced by former prime minister Boris Johnson last September and is the first government support for a nuclear project in more than 30 years.   

  It will power the equivalent of six million homes for more than 50 years and represents “the biggest step” in Britain’s “journey to energy independence”, Hunt said.   

  Hunt confirmed the UK’s commitment to a 68% reduction in carbon emissions by 2030. “Last year almost 40% of our electricity came from offshore wind, solar and other renewables,” he said.   

  He added that from April 2025 electric vehicle drivers will no longer be exempt from paying car taxes.