Cost of living: Chancellor Rishi Sunak hints again at windfall tax u-turn

Chancellor Rishi Sunak has hinted again at introducing a windfall tax on oil and gas firms.

Ministers had repeatedly ruled out the measure - championed by opposition parties - that would see a one-off tax on firms' record profits to fund support for the hardest hit households.

But both Mr Sunak and the PM appear to have moved towards the idea.

Speaking in the Commons, the chancellor said "no option was off the table" if energy firms did not invest in the UK.

A windfall tax was raised as part of the ongoing Queen's Speech debate in Parliament, with Labour forcing MPs to vote on the policy.

Labour's motion in support of the tax was defeated by 310 votes to 248.

A total of 59 Tory MPs abstained on the vote - meaning they did not vote either way. But it is not yet clear whether they were rebelling against the government, or had other commitments when the vote was held.

Shadow chancellor Rachel Reeves said every Tory MP who voted against the tax had "sent a clear message - they will not put working people first, and they have no answer on the cost of living crisis".

Households in the UK are being hit with rising costs when it comes to fuel, energy and food, as inflation reaches a record high in the country - dubbed the cost of living crisis.

Labour, the SNP and the Liberal Democrats have all proposed using a windfall tax on oil and gas companies, whose profits have rocketed as the economy got back up and running after the pandemic, saying the billions raised could go towards targeted support for struggling households.

The government has not yet given its support to the move, with Boris Johnson previously saying it would hamper investment and keep oil prices higher over the long term.

However, last week, Mr Sunak threatened to impose the tax if the firms did not invest enough in new projects, and Mr Johnson said the government would have to look at the proposal if not enough investment was made.

Bringing up the policy during Tuesday's debate, Mr Sunak told MPs: "I have always been clear we stand ready to do more."

He said Conservatives did not believe windfall taxes were the "simple and easy answer to every problem", but added: "We are pragmatic.

"And what we want to see is energy companies who have made extraordinary profits at a time of acutely elevated prices investing those profits back into British growth, jobs and energy security.

"But, as I have been clear and as I have said repeatedly, if that doesn't happen soon and at a significant scale then no option is off the table."

Former Labour leader Mr Miliband told MPs: "I think a massive u-turn is lumbering slowly over the hill."

He added: "But I say this to the chancellor, swallow your pride and get on with it. Because every day he delays is another day where the British people are denied the help they need.

"Millions of families having sleepless nights because the chancellor wont act. What is he waiting for?"

The shadow secretary also repeated Labour's call for an emergency Budget focused on the cost of living crisis, listing its proposals - including a windfall tax, a cut on VAT and a cut in business rates.

There was a sigh from some Tory MPs on Monday about the prospect of Labour's forced vote on a windfall tax later.

One agonised that they didn't want to be made to vote against it if there was still a possibility the government could perform a u-turn and decide to go ahead with one.

The reason for the angst is that cabinet ministers have been increasingly softening their language about the idea.

What was once off the table is, quite simply, back on.

Multiple government sources tell me a cost of living announcement is coming imminently. What that will include is still being ironed out, but some say a windfall tax is looking increasingly likely.

In the meantime, though, ministers are on the airwaves being asked about it and trying to toe the fine line between not ruling it out, but not appearing too gung-ho about it either.

Privately though, there are some still very against the idea, despite the fact "nothing is off the table" is now the line to toe.

While the government has not announced further policies since the energy cap rise in April to cut the cost of living, the PM has tasked his cabinet with finding non-fiscal measures that can help.

Ideas of loosening regulations for childcare provision, and how often people need MOTs have already been put on the table.

But during a meeting with his team in No 10 on Tuesday, Mr Johnson focused on cutting crime, saying it was "integral to our economic mission".

A senior government source said ministers discussed "how crime creates poverty" and "cutting crime helps reduce insurance premiums".

They said tackling crime would "stop people being poorer because they are robbed", and stop people "having to buy new bikes, new phones".

The source also said police recruitment would help with creating more jobs.