Sunak to expand windfall tax after Shell avoids paying up despite profit jump

28 October 2022, 04:11 | Updated: 28 October 2022, 06:55

Rishi Sunak is set to expand the windfall tax on energy giants in a bid to raise billions.

He is understood to be considering several proposals including increasing the levy, extending the deadline and expanding its remit to include renewable energy generators.

It comes after Shell revealed that it had not paid a windfall tax despite seeing a huge jump in profits.

The energy giant said that because it had made large investments in the UK it meant it had made no profit here.

Mr Sunak held a meeting with Chancellor Jeremy Hunt on Thursday, in which they agreed that there was still a "massive fiscal black hole to fill" despite seeing an improvement in the markets.

The pair have warned that difficult decisions will be made in order to balance the books, with several other spending cuts thought to be on the cards such as pensions and benefits.

Read more: Rishi Sunak reconsidering tax hikes as budget delay saves Treasury £15 billion

Read more: Nadhim Zahawi refuses to rule out new windfall tax as Shell doubles profits to £8billion

A 25% levy on energy profits was brought in in May by the PM during his time as Chancellor, but the tax only applies to profits made in the UK.

Shell recorded record profits of $11.5 billion in July as people across the UK are facing soaring bills amid a crisis over the cost of living crisis.

It was up from the $4.2 billion the company reported for the same period last year.

However, it is not expected to start paying windfall taxes until early next year.

The company's CEO said the Government should tax energy companies further to "protect the poorest" in society.

Ed Miliband, Labour's shadow climate change secretary, said the current windfall tax was flawed and "would see billions of pounds of taxpayer money go back into the pockets of oil and gas giants through ludicrous tax breaks".

Shell's profits were "further proof" the UK needed a higher windfall tax to make sure energy companies "pay their fair share", he said.

It comes after Tory party chairman Nadhim Zahawi told LBC it was an option Mr Sunak would be looking into.

"These are tough decisions and I know the Chancellor and the Prime Minister will be looking at everything," he said.

Pressed by Nick again on the issue, he added: "I would not pre-empt any decisions but absolutely the Chancellor and the Prime Minister will look at every decision."

Oil and gas prices began to rise after the pandemic but continued to spiral further after Russia's invasion of Ukraine, resulting in more profits for energy companies.

It has led to a rise in energy bills for both households and businesses, with the government introducing the Energy Price Guarantee scheme to deal with the crippling crisis.

However, despite being originally planned to last two years, the cap will now end in April.

There have been warnings that typical household gas and electric costs could reach more than £4,300 when it is removed.