Limited gas and oil supplies across the globe caused by the pandemic have resulted in market prices soaring and an already heavily monopolised industry desperately bustling for control over supply infrastructure. For British households, this may lead to a 54% increase in combined energy bills from April 1st, according to Ofgem (the UK’s energy regulator) – pushing an estimated 30% of households into fuel poverty (up from 11%).
In spite of this, Britain’s two largest oil companies – North sea oil giants Shell and BP – announced record profits of over £40bn combined last month, with BP’s Chief Executive, Bernard Looney proclaiming, “We are performing and delivering for our shareholders today, while at the same time leaning into the future and transforming the company”, adding: “[the company has] more cash than we know what to do with”.
In a bid to address this imbalance, the government proposed providing low-income households with a one-off £200 loan, which would have to be paid back in £40 instalments over 5 years. However, the Labour Party highlighted that this could equate to just 29% of the overall cost increase for the hardest-hit households (those with outdated supply infrastructure and poorly-insulated homes) and only add further debt to households already struggling to make ends meet with inflation at 5.5% – a 30-year-high. They instead proposed a “Windfall” Tax – a one-off government tax bill on large companies seeming to benefit from market conditions beyond their control, whilst seeing increased demand for their product – which would raise an extra £1.2 billion to help struggling households.
In response, The Treasury claimed, “A windfall tax could deter £14bn worth of opportunities awaiting investment, which would risk both security of our energy supply, as well as almost 200,000 jobs that rely on the industry”. Conversely, Labour’s new Secretary of State for Climate Change challenged this stating, “The boss of BP described the energy price crisis as a cash machine for his company – and the people supplying the cash are the British people through rocketing energy bills… it is only fair and right for oil and gas producers to contribute to helping the millions of families facing soaring inflation and a cost of living crisis”.
Despite numerous challenges from all opposition parties, as well as a handful of his own backbench MPs, Chancellor Rishi Sunak continues to back the Treasury’s policy – itself not due to begin until October, half a financial year after the price cap increase comes into effect.