The government will raise an extra £14bn next year by increasing the energy windfall tax, Jeremy Hunt has announced.
In his first autumn statement as chancellor he said the Energy Profits Levy, as the tax is known, will rise from 25% to 35%.
The move follows months of pressure from Labour for ministers to raise more money from oil and gas giants.
Mr Hunt told MPs he had “no objection” to windfall taxes if they were genuinely on windfall profits caused by unexpected increases in energy prices.
“But any such tax should be temporary, not deter investment and recognise the cyclical nature of many energy businesses,” he said.
He also announced a windfall tax on electricity generators of 45 %. The move means wind farms in UK waters will pay a higher windfall tax than neaby oil and gas rigs. Together the two taxes will raise £14bn next year, Mr Hunt said.
Announcing his plans he told MPs the OBR believes the UK is in recession. He said he was delivering a “balanced path to stability” which involves “taking difficult decisions”.
But “anyone who says there are easy answers is not being straight with the British people: some argue for spending cuts, but that would not be compatible with high-quality public services.”
His first job had to be to tackle inflation which “eats away at the pound in people’s pockets even more insidiously than taxes”, he said.
But shadow chancellor Rachel Reeves said that after months of resistance, the government had “finally been dragged kicking and screaming to extend the windfall tax that Labour first called for in January”.
“The government has announced plans for energy bills next year, but bill-payers will still see them go up next spring, leaving far too many people wondering how they’ll make ends meet. For every pound of windfall tax left on the table, working people are forced to pay the price,” she said.
Treasury minister John Glen later said he “did not accept” that the government had replicated Labour policy on the windfall tax.
Green MP Caroline Lucas welcomed the higher windfall tax but said it was “scandalous” that the chancellor was “keeping the investment allowance, giving a massive subsidy to obscenely wealthy oil and gas companies”.
