A Treasury minister has defended the lack of detail furnished by Rishi Sunak about government plans to extend its windfall tax on oil and gas profits to electricity generation.
The chancellor of the exchequer said in last month’s cost-of-energy statement that he was “evaluating” an extension of the energy profits levy, which will initially be imposed on oil and gas production in the North Sea.
However, Sunak has provided few details about how the proposed levy would be applied to electricity generators, which companies fear could undermine investment in low-carbon energy infrastructure.
John Glen, exchequer secretary in the Treasury, was quizzed on the new levy when he gave evidence to the House of Lords Economic Affairs Committee on Tuesday afternoon 14 June) as part of its ongoing inquiry into energy supply.
Pressed by the committee’s chair Lord Bridges on why the chancellor had not provided any more detail about the levy, Glen said the government had had to act “urgently” to provide “reassurance” to households facing mounting energy bills.
He also said that the government is examining an extension of the levy alongside more long-term reforms of the wholesale power market to break the link between the marginal price of gas generation, which is fuelling current bill hikes, and low-carbon generation.
Glen said: “In the long term, we think reform of the energy market is essential to achieve stability of pricing and predictability. We want to implement those reforms but also make interventions that recognise where those (profits) can be captured, where they’re extraordinary and where we can clearly demonstrate that.
“I don’t think anyone disputes extraordinary profits exist.”
Responding to Lord Bridges’ concern that the government has taken a “contradictory” stances after performing a volte-face on the windfall tax, Glen said the government had to be “pragmatic”.
“It is not ideal, but we are in a situation where what is happening in Ukraine is not ideal and we are having to make interventions to support many vulnerable people.”