Rachel Reeves has said the tax breaks the government is offering oil and gas companies are “totally wrong” after BP announced its profits had tripled to almost £7billion in the second quarter of the year.
The Shadow Chancellor said: “People are worried about the further rise in energy prices in the fall, but again we are seeing eye-popping profits for oil and gas producers.
“Labour argued for months for a windfall tax on these businesses to cut bills, but when the Tories finally did an about face they decided to return billions of pounds to producers in the form of tax breaks. It is totally false.
“It’s clear that people need more protection against rising bills. That’s why Labor would use that money now to help people get through the winter.
“But we can’t go on like this. The work would permanently reduce energy bills with a green energy sprint for local electricity and a ten-year warm homes plan to reduce bills for 19 million cold and drafty homes.
The government announced in May that it would introduce an energy profit tax on “extraordinary profits” from the oil and gas sector – a policy that Labor has been pushing for since January.
The government’s levy includes a new investment allowance, a ‘super-deduction’ type relief designed to ‘encourage companies to invest in oil and gas extraction in the UK’. The investment allowance will mean businesses will receive 91p in tax savings for every pound invested in the North Sea.
Commenting on the profits reported by BP today, TUC General Secretary Frances O’Grady said: “Every family should get a fair price for the energy they need. But with energy bills rising much faster than wages, these profits are an insult to struggling families.
“For a fair approach to the cost of living crisis, price hikes and profits must be curbed. Ministers must do more to raise wages across the economy. And we should get energy retail companies to go public to reduce bills for basic energy needs.
Consultancy firm BFY has estimated that the energy price cap – set by regulator Ofgem – could reach £3,420 in October for the average dual-fuel tariff. The cap is set to be raised again in January, with BFY predicting it could reach £3,850.
The director of the Commons Wealth think tank, Matthew Lawrence, said work list“Energy giants are making colossal sums while the public faces extraordinary increases in their bills. With BP profits at their highest in 14 years and living standards in crisis, it is clear that we should be squeezing profits, not wages.
“This morning’s results confirm once again that our energy system is not serving the public interest – it should be reengineered around social and environmental needs.”
Shell announced last week that it made record profits of £9.5bn between April and June, a 26% increase on the first quarter of this year, which was a previous high. The company plans to pay shareholders payouts worth £6.5 billion.
British Gas owner Centrica has revealed its operating profit for the six months to the end of June was £1.34billion, down from £262million for the same period last year.
The TUC unveiled a plan last week to cut bills through public ownership of energy companies. In launching the plan, O’Grady said it was time “to ease the burden of failed privatization on families.”
The Affordable Energy Plan states that nationalization could reduce energy bills by: ending shareholder dividends; make more money available to reduce bills; create incentives to make homes more energy efficient; and enable least-cost pricing structures for basic energy needs.
The union organization said bringing energy companies into public ownership would mean that money currently being spent on shareholder dividends could instead be used to cut bills and come up with energy efficiency measures.
He concluded that public energy companies would have more incentive to introduce energy efficiency improvements in homes and would have the power to set energy prices by prioritizing affordability for customers, rather than maximize profits for shareholders.
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