A new split is emerging in the Cabinet as ministers are divided over whether energy companies should face a windfall tax.
Just days after Rishi Sunak hinted that oil and gas suppliers could be subject to a windfall tax, Business Secretary Kwasi Kwarteng dismissed the idea.
The government is facing calls to impose a tax on major energy companies as BP and Shell are expected to unveil large payments to shareholders this week.
Labor and the Liberal Democrats are both demanding a windfall tax on energy companies to help families struggling with the cost of living crisis.
However, Kwasi Kwarteng criticized the idea, although the Chancellor did not rule out such a move.
Kwarteng told Sky’s Sophy Ridge on Sunday: “I’ve never been a fan of windfall taxes, I’ve been very clear about that publicly. I think they discourage investment.
He described such a tax as “arbitrary and unexpected” although he refused to rule out the government imposing one in the future.
Pressed on whether the government had ruled out a windfall tax, Kwarteng told the BBC: ‘I won’t be here on the program excluding what the chancellor is going to do or isn’t going to do in an October budget. is not my job.
It comes after Sunak hinted at a potential reversal of a tax on oil and gas suppliers, after repeatedly refusing to consider the idea.
He suggested he would consider a windfall tax on the industry if it failed to increase investment in new energy projects.
Speaking to Mumsnet, Sunak said he didn’t go the windfall tax route because he didn’t want to postpone investment in new oil and gas extraction, pointing to a recent $25 investment. billion pounds by a company in the North Sea.
But he added: “What I would say is if we don’t see that kind of investment coming up and companies don’t make those investments in our country and in energy security, then of course it’s is something I would watch and nothing is ever out of place in these things.
Kwarteng wrote to BP and Shell last week asking for a “very clear plan” in the coming weeks to reinvest profits.
They are expected to present what will likely be their best set of results in years while facing calls to cough up more taxes.
They are expected to report a combined profit of £10.5bn in the first three months of the financial year, a massive increase on the same period in 2021.
Much of that will come from the money households pay to keep the lights on, heat their homes and refuel their cars.