The government has been accused of playing “hokey-cokey” with electricity generators after abandoning moves to extend its windfall energy tax to the sector.
Then chancellor of the exchequer Rishi Sunak said in May that he was “evaluating” steps to impose the new energy profits levy on generators due to the “extraordinary profits” that some companies have been making on the back of the recent spike in wholesale power prices.
However, it emerged during a briefing by prime minister Boris Johnson’s spokesman that generation will not be covered by the levy.
During the first day of the debate on the legislation introducing the levy on Monday (11 July), shadow Treasury minister James Murray highlighted the silence surrounding idea of a windfall tax on the electricity generation sector.
He said: “We know the government were planning to tax the sector’s profits, as it was widely briefed in late May that the former chancellor had ordered Treasury officials to draw up plans for a windfall tax on electricity generators.
“The uncertainty created by this will-they-won’t-they hokey-cokey on taxing profits from electricity generation risks discouraging vital investment in our future energy security.”
Murray also called on the government to bring forward legislation to decouple the price of electricity from the price of gas: “We are not claiming that a solution to this is simple, but it is the job of ministers, and a sign of leadership in government, to plan ahead and solve the challenging issues our country is facing.”
Lucy Frazer, financial Secretary to the Treasury, said the government is “urgently” looking at the electricity generation sector.