Cornered by inflation and the “partygate” scandal, his government presented the bill conceived by Finance Minister Rishi Sunak
By
Juan DillonFrom France
The United Kingdom has finally decided to tax the profits of the big energy players to finance new measures against the increase in the cost of living. For this plan, it departed from the principle of low taxation, a historical hallmark of the Conservatives.
The UK has finally decided to tax the profits of the big energy players to finance new measures to deal with the rising cost of living. Rising energy prices and the threat to purchasing power have never hit the UK harder since 1950.
While inflation could top 10% in the coming months , the British finance minister, Rishi Sunak, has presented a plan of aid of 15,000 million pounds, aimed mainly at low-income households. In addition to the economic situation, the surprising political turn, after so many twists and turns, sounds like a lifesaver in the face of the possible motion of censure against Boris Johnson for broken rules during confinement, a scandal known as “partygate”
To finance this program, the Conservatives will move away from one of the maxims of his party: the principle of low taxation or tax pressure. The windfall profit tax on oil and gas producers to fund new aid for low-income households means taking almost £5bn from the profits of the big players in the energy sector.
The objective is to help the households hardest hit by the post-pandemic crises, adding what Brexit has left behind and now causing the Russian invasion of Ukraine. It is likely that these sectors, in the coming months, will require an “energy shield”, introduced in France with the cap on the increase in electricity at +4% and the aid of 18 cents per liter of fuel, financed by the Status.
All these measures, which have also been taken in Germany and Spain, with socialist governments, have been demanded by the Labor opposition, the unions and associations for weeks and that at the time were rejected in the House of Commons by the majority conservative that today should support them.
Boris Johnson defies the rules of liberalism. And with this, oil and gas producers will see their profits reduced by 25%. In return, they will benefit from an investment support mechanism that will allow them to recover, for 1 pound invested, 90 cents in tax credit. It must be said that similar measures were taken by Italy and Hungary, targeting the taxation of energy.
For homes it will be some air for a situation that was suffocating. The annual price of energy for each family, estimated by the British regulator, will rise in October by almost 1,000 euros, after the jump of 800 euros in April.
Rishi Sunak defended a “timely, targeted and temporary” intervention, seeking to dispel the idea that this fiscal support could increase the risk of an inflationary spiral
Specifically, the Chancellor announced a 400-pound discount on energy bills for each household, plus payments of £650 for people on benefits, £300 for retirees and £150 for people with disabilities.
In a country where 6.5 million households suffer from energy poverty, inflation has revived the debate on inequality. The 15,000 million pounds in contributions for this plan mean, according to the Johnson government, reaching 8 million poor people, with benefits reaching 1,200 pounds.
In numbers, these “benefits” also seem to be a setback compared to previous announcements. In particular, the government reversed an aid of 200 pounds, scheduled for October, which should have been repaid gradually. A mechanism that was something like an interest-free consumer loan, but risky if households did not have the capacity to repay it. With the announcements, it is now promised that this idea of a later reimbursement will be abandoned and the aid, which all households receive, will be increased to £400.
En his presentation to the House of Commons, Rishi Sunak defended a “timely, targeted and temporary” intervention, seeking to dispel the idea that this fiscal support could increase the risk of an inflationary spiral.But Sunak, who was a candidate to succeed Johnson, is in the sights of the opposition: the Chancellor of the Exchequer has a fortune close to 800 million pounds. Never before has a prominent politician been on the list of the richest people in the country. Question also to be clarified.
In context: a “disturbing” political climate. The announcement comes in another difficult pass for Boris Johnson, following the harsh report on the celebrations in Downing Street. So this turn to “left” measures sounds like a ploy by the Prime Minister to escape a position of weakness. “The Conservatives are doing it now because they need new incumbents,” said Rachel Reeves , British economist and Labor Party politician.
The most neoliberal conservatives have harshly criticized this ideological shift. “These socialist measures open the door for the opposition, if it comes to power, to be authorized to raise taxes again and again”, Deputy Richard Drax has reproached Sunak.