Boris Johnson ‘not attracted’ by new taxes as he promises cost-of-living help

The Prime Minister is under pressure to introduce a windfall tax on oil and gas firms’ profits.

23 May 2022

Boris Johnson insisted there would be further help to deal with the rising cost of living but he was “not attracted” by the idea of new taxes in response to calls for a one-off levy on oil and gas firms to support struggling households.

The Prime Minister said the Government would “put our arms round people” but he declined to spell out what support might be offered, or when.

One idea which appears to have been rejected by the Treasury is a return of the £20-a-week increase in Universal Credit.

The Prime Minister has faced pressure from MPs, including some Tories, to introduce a windfall tax to pay for new measures to help poorer households cope with rising food and energy bills.

Boris Johnson visit to Kent
Prime Minister Boris Johnson during a visit to St Mary Cray Primary Academy, in Orpington (Stefan Rousseau/PA)

Mr Johnson said: “No option is off the table, let’s be absolutely clear about that.

“I’m not attracted, intrinsically, to new taxes.

“But as I have said throughout, we have got to do what we can, and we will, to look after people through the aftershocks of Covid, through the current pressures on energy prices that we are seeing post-Covid and with what’s going on in Russia and we are going to put our arms round people, just as we did during the pandemic.”

He said there was “more that we are going to do” but “you’ll just have to wait a little bit longer”.

The return of the £20 uplift in Universal Credit, which was introduced in the pandemic but withdrawn in October, has been seen as a way of targeting help at the poorest.

Michael Lewis, chief executive of energy giant E.ON UK, said on Sunday that increasing benefits payments would ease the pressure on those dealing with ballooning energy bills and soaring inflation which is driving up shop prices.

But Treasury Chief Secretary Simon Clarke ruled out the measure.

He told BBC Radio 4’s Today programme: “On that question, we were always explicitly clear that was a temporary response to the pandemic.

“That is not going to return. The question is how we best now look at the next range of solutions to deal with the challenges we’re facing.”

The Treasury minister pointed instead to how Chancellor Rishi Sunak has already lowered the taper rate for Universal Credit, the rate at which benefits start to reduce as a claimant earns money, allowing the lowest earners to keep more of their wages.

“We took decisive action back in December with the change to the taper rate, that is to say the rate at which benefits are withdrawn as people’s earnings rise, and we cut that from 63p in the pound to 55p in the pound,” he added.

“That’s a tax cut worth an average of £1,000 to two million of the lowest earners in society.”

He described the taper rate action as “precisely the kind of authentic Conservative solution to this question that we want to see” as ministers consider how next to respond to growing household budget pressures.

Pressure for a windfall tax has come from Labour but also from some senior Tories.

Conservative MP and former Treasury minister Jesse Norman, pointing out that former prime minister Margaret Thatcher used windfall taxes during her tenure in No 10, told Today: “A windfall tax justification in part rests on the widespread need that we are going to need to support people, and recognition of that.

“And we’re going to do that, I hope, quite comprehensively, because that’s what’s going to be needed.”

Conservative MP Jesse Norman
Conservative MP Jesse Norman pointed out that Margaret Thatcher used windfall taxes when she was prime minister (Conservative Party/PA)

Speaking to LBC about the prospect of a windfall tax, Mr Clarke said it remains an option if oil and gas companies do not invest in securing the future security of domestic energy supplies.

“The sector is realising enormous profits at the moment,” he said.

“If those profits are not directed in a way which is productive for the real economy, then clearly all options are on the table.

“And that’s what we are communicating to the sector, that we obviously want to see this investment, we need to see this investment.

“If it doesn’t happen, then we can’t rule out a windfall tax.”

He told ITV’s Good Morning Britain that the UK Government is “not going to rush into action” but suggested support will be forthcoming given the “severity of the situation”.

“Philosophically, I don’t want to be raising taxes but nor obviously can we ignore the fact that there is a very challenging situation in terms of the cost of energy at the moment that will likely worsen ahead of next winter, and the Government is going to need to take action to address that,” Mr Clarke told BBC Breakfast.

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