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“A windfall tax with no green strings attached”: Reactions to Rishi Sunak’s cost-of-living measures

The Chancellor has laid out steps to help people with food and fuel costs. Will it be enough?

By Harry Clarke-Ezzidio

Following weeks of pressure to take action on the economic crisis, Chancellor Rishi Sunak has outlined £15bn worth of measures aimed at helping Britons with the cost of living.

After a number of senior Conservative MPs dismissed the idea of imposing a one-off windfall tax on energy companies making soaring profits (largely driven by Europe halting its reliance on Russian gas), on Thursday Sunak announced the introduction of a temporary Energy Profits Levy, which will be charged on the profits of oil and gas companies at a rate of 25 per cent. “It raises around £5bn of revenue over the next year, so that we can help families with the cost of living, and it avoids having to increase our debt burden further,” Sunak said.

Further on in his statement in the Commons, Sunak announced a combination of targeted and universal support measures aimed at easing the cost of living. Over the coming months, three groups of people will receive “one-off cost-of-living payments”. Around eight million people on the lowest incomes (primarily those receiving Universal Credit) will receive a payment of £650; pensioners who receive the winter fuel payment will get £300; and more than six million people on disability benefits will get a payment of £150. Moreover, the energy bill rebate Sunak announced in his Spring Statement will now become a £400 grant, which will take effect in October, when energy bills are set to increase further.

To gauge the reaction to the measures announced, Spotlight has spoken to and collated responses from politicians and experts.


Rachel Reeves MP – Shadow chancellor, Labour

Let there be no doubt about who is winning the battle of ideas in Britain: it’s the Labour Party. We first called for a windfall tax on oil and gas producers nearly five months ago to help struggling families and pensioners. And it was Labour that first highlighted the unfairness of this government’s buy now, pay later compulsory loan scheme. It shouldn’t have taken a rocket scientist to work out that this wouldn’t cut it and we pointed it out at the time. But that is just the mark of this “Klarna Chancellor” – announce now, ditch later.

Labour called for a windfall tax because it is the right thing to do; the Conservatives are doing it because they needed a new headline. And we see that too, from all the other things that the Chancellor didn’t address today. The non-doms keeping their tax privileges, while [the government increases] taxes on working people; young working people paying more, but those buying and selling stocks and shares not paying a penny more; contracts handed out to Conservative friends and donors while British businesses miss out…; and £11.8n lost in fraud because of a total lack of respect for taxpayers’ money. The position is now clear: we lead, they follow.

Comments adapted from a statement made in the House of Commons.

Wera Hobhouse MP – Spokesperson for climate emergency and energy, Liberal Democrats

Make no mistake, this is a Sunak scam. He has promised the British public help but is picking people’s pockets while you are not looking. The Chancellor is hammering families with a £800 tax hike this year, more than wiping out what he announced this week. The best way to help people right now would be for Sunak to scrap his unfair tax hikes, starting with VAT. This would put money back into people’s pockets, boost the economy and support struggling businesses. 

Looking ahead, hundreds of pounds have been slapped onto people’s bills by the Conservative’s short-sighted approach to energy efficiency. We need a long-term plan to retrofit leaky homes. This would bring down people’s bills and play a part in tackling the climate emergency, while reducing reliance on Russian oil and gas. The windfall tax is long overdue. The Conservatives arrogantly dismissed a windfall tax for several months. While they dithered and delayed, pensioners sat lonely in the cold each night, families were choosing between heating and eating, and over 1,000 children fell into fuel poverty every single day. A constituent wrote to me to say that they could not afford heating. To keep warm, they stayed in bed. Where was the Chancellor when my constituent was forced to stay in bed to keep warm?

Carla Denyer – Co-leader, Green Party

After weeks of dithering and disarray, Rishi Sunak has finally intervened to help the millions of households struggling to pay their energy bills. It is welcome news that he has finally gone after the dirty profits of oil and gas corporations. Money raised from this windfall tax should be wholly targeted towards those on lowest incomes, who are currently facing a much higher rate of inflation because they are forced to spend so much of their income on energy costs. However, the Chancellor’s version of a windfall tax deliberately seeks to incentivise the fossil fuel industry to increase investment in oil and gas. That these companies will be rewarded with 90 per cent tax relief for every pound they invest is climate vandalism, especially since there are no corresponding incentives to encourage investment in renewables. 

And the Conservative government still doesn’t understand that the cheapest bill is the one you don’t have to pay. Sunak has yet again failed to address the urgent need for energy efficiency. We need to move beyond a windfall tax towards a carbon tax on all polluting industries, which would help fund a mass home insulation programme and drive the transition to a green economy.

Luke Murphy – Associate director for energy and climate, IPPR

This intervention should be enough to plug the hole in family budgets in the short term. But the problem with this government is that it lurches from crisis to crisis and fails to put the necessary long-term plans in place, whether that be to support households, the economy, or protect the environment. We need to see support that can keep families afloat not just this year, but into the future, and that means a social safety net that is fit for purpose.

Moreover, this government’s decision to levy a windfall tax on oil and gas firms is a welcome U-turn, but at the same time giving bigger tax breaks to extract more oil and gas will lock in greater dependence on fossil fuels. This is bad for future energy bills, our energy security and our environment. The government must now focus on the root causes of our energy problems and bring forward a serious plan to reduce our reliance on fossil fuels, which its so-called Energy Security Strategy failed to deliver earlier this year. That must include backing the cheapest and quickest form of clean energy in onshore wind and investing in a mass homes upgrade programme to make people’s homes warmer, cut energy bills and reduce our dependence on gas.

Richard Murphy – Political economist, Sheffield University

Chancellor Sunak had three things to do to tackle inflation on Thursday. He failed. First, he had to cut the rate of inflation to reduce the pressure on wage rises, stop the contagion from fuel costs into the rest of the economy, and help struggling businesses. This demanded that he cut gas and road fuel prices by cutting the rates of duty and VAT on them to cap his tax take at 2020 levels. For electricity he could have changed the [energy regulator] Ofgem pricing structure, which requires that electricity be sold at the marginal cost of producing the most expensive component in the electricity mix, and instead have required sale at the overall average cost of production. He didn’t do either of these things.

Second, he should have tackled all companies exploiting the current shortages, including banks gaining extraordinarily from rising interest rates. He did not. Instead he introduced a token gesture windfall tax that actually encourages oil exploration during a climate crisis. Third, he had to take the heat out of demand by increasing taxes on the rich while helping the vulnerable. He did not, and the support he offered will have loopholes and gaps in it, welcome as it was. As in 2020, Sunak will be back again soon to have another go at getting this right because he failed badly yesterday.

Sam Alvis Head of economy, Green Alliance

It feels like March 2020, with Rishi Sunak returning to the Dispatch Box as the scale of a problem became more and more obvious. Let’s be clear, the support he offered to households was big and necessary. Crucially, it’s funded off the back of those profiting from this crisis: fossil fuel companies. But for many, while the pain will be stemmed, the Chancellor hasn’t sewn up the wound. This is a crisis largely driven by our reliance on volatile oil and gas markets. And while the temporary Energy Profits Levy includes incentives for companies to invest, the super deduction has no green strings attached to ensure we are moving faster towards cheaper and more secure low-carbon energy like wind and solar. The Chancellor says he is wary of burdening future generations with debt; the real burden will be the UK’s continued exposure to volatile gas prices and the worsening impacts of climate change. Many people will be looking at their draughty homes and their gas boilers wondering what happens if prices are high again next year.

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