In his statement, he said: “I have no objection to windfall taxes if they are genuinely about windfall profits caused by unexpected increases in energy prices.
“But any such tax should be temporary, not deter investment and recognise the cyclical nature of energy businesses.”
Mr Hunt said from January 1 until March 2028, the government will increase the Energy Profits Levy from 25 per cent to 35 per cent.
Furthermore, from January 1, the government will introduce a temporary 45 per cent levy on electricity generators.
He said that increasing these taxes will raise £14 billion next year.
But what is a windfall tax? Here’s everything you need to know.
What is a windfall tax?
A windfall tax is a one-off tax that the Government imposes on a company or a group of companies when they benefit from something that happened outside their control.
Energy companies are benefiting from the increased demand for energy following the pandemic and Russia’s invasion of Ukraine.
Who called for a windfall tax on oil and gas companies?
Philip Evans, Greenpeace UK’s oil and gas campaigner, called for a windfall tax and said: “By using a big chunk of the bloated profits that Shell, BP, and others are raking in, to make homes warmer, more energy efficient, and kitted out with heat pumps, the Government could start to really tackle the climate and cost-of-living crises simultaneously.”
Ed Miliband, the shadow secretary of state for climate change and net zero, said earlier this year: “Another day, another oil and gas company making billions in profits, and yet another day when the Government shamefully refuses to act with a windfall tax to bring down bills.”
Protesters shut 40 of Shell’s London garages
What has the Government said about a windfall tax?
The chancellor, Jeremy Hunt, was initially believed to be considering raising the windfall tax from 25 per cent to 30 per cent, and extending it by three years to 2028. The levy had been introduced in May by Rishi Sunak when he was the chancellor.
He was at odds with the then-prime minister, Boris Johnson, as the former prime minister had expressed hostility to a windfall tax, saying it would “discourage [oil and gas companies] from making the investments that we want to see that will, in the end, keep energy price prices lower for everybody”.
In May, a Treasury spokesperson told the Independent: “Oil and gas companies in the North Sea are already subject to a tax rate on their profits that is more than double those paid by other businesses. To date, the sector has contributed more than £375 billion in production taxes.”