Labor has accused Rishi Sunak of creating uncertainty and hurting investment plans with his ‘random, last-minute’ threat to impose a windfall tax on UK power producers, a move that wiped £3bn off their share price.
Last month, Britain’s Chancellor warned he would consider hitting electricity generators with a levy later this year when he announced a 25% tax on ‘extraordinary profits’ made by oil and gas companies from the North Sea. The move is designed to raise billions of pounds to provide financial support to households struggling with rising energy bills.
The Chancellor said that “parts of the electricity generation sector [were] also making extraordinary profits” and he was “urgently assessing” their magnitude and next steps.
Government insiders said Sunak wanted to “determine any course of action quickly”, with internal Whitehall estimates suggesting he could seek to raise £3-4billion from power generators.
Labour, which initially championed a windfall tax on oil and gas producers, says Sunak is hurting the investment environment for new energy projects by threatening to extend the tax.
Britain’s main opposition party pointed to falling share prices of companies likely to be affected by such a move, including Drax, Centrica and SSE. “In just one week almost £3billion has been wiped off the value of these businesses,” Labor said.
“It is the hallmark of this chaotic, disconnected and out of ideas Government that their hastily cobbled together plan has this kind of impact on British businesses. They must provide urgent clarification immediately,” said Shadow Chancellor Rachel Reeves.
Sunak refrained from announcing the generator windfall tax last week as it required additional technical work, but Whitehall insiders said he wanted the uncertainty to end within weeks.
The Treasury declined to comment on a report in the Sunday Telegraph newspaper that said it was considering whether a windfall tax would exclude electricity generated by renewables and nuclear power and instead focus on operators of gas and coal-fired power stations.
The generators privately admit they face an uphill battle as Sunak is determined to implement a windfall tax and is trying to ensure that investments in low-carbon infrastructure can be offset by the tax.
Electricity producers were caught off guard when the Financial Times revealed last month that the Chancellor was planning to extend the windfall tax to their sector. They have since warned the Chancellor that their industry is far more complicated and diverse than upstream oil and gas.
Many owners of power plants and wind farms insist on selling their production well in advance and have therefore not benefited from recent high electricity prices.
But analysts pointed out that many companies providing “flexibility services” – producing electricity to fill supply gaps when renewable sources such as wind and solar are not producing – will likely have received a boost. bargain.
It is believed that generators who still hold some of the earliest renewable generation contracts – which provide a subsidy on top of wholesale prices – have also benefited.
However, energy groups insist that while producers have benefited, many are reinvesting billions in UK infrastructure such as new offshore wind farms or expanding the electricity grid to support the UK’s low carbon ambitions. United.
The UK government is also leaning on energy companies such as SSE, Spain’s Iberdrola and EDF Energy to push ahead with new clean energy projects such as offshore wind farms and nuclear power stations to boost national energy sources after the invasion of Ukraine by Russia.