Companies that stand to make significant profits from record energy market prices could face a windfall tax to help ease the burden on households’ bills, the business secretary has suggested.
Kwasi Kwarteng told MPs on Wednesday the government was considering “all options”, including looking at the Spanish government’s plan for a €3bn (£2.58bn) windfall tax on generators and energy traders that stand to gain from the energy crisis while homes and suppliers struggle.
“I think what they’re doing in Spain is recognising that it’s an entire system. We’re in discussion with [energy regulator] Ofgem officials, looking at all options,” Kwarteng told the business select committee.
Spain’s windfall tax will target companies that have made “excess profits” from the fast-rising energy market prices. This will be used to create a fund to cover the cost of infrastructure investments and taxes that would otherwise have come from household energy bills.
The move has been strongly opposed by companies, including owners of nuclear power plants which are not exposed to higher energy costs but are able to sell their nuclear electricity for far higher prices.
“I’m not a fan of windfall taxes,” the business secretary added. “But of course [the energy system’] is an entire system and we have to think about how we can get the energy system as a whole to help itself.”
Kwarteng said safeguarding energy consumers was a government priority in its plans to tackle the deepening gas crisis which has seen UK gas markets climb more than fourfold in the last year after a global boom in gas demand.
He said the government’s energy price cap would remain in place to ensure households pay a fair price for their energy.
The government is also under pressure to address the UK’s carbon dioxide shortage triggered by the shutdown of two fertiliser plants, owned by US company CF Industries – which provide 60% of the UK’s CO2 – due to the record gas prices.
Earlier this week the government agreed to provide “limited financial support” for CF Fertilisers’ operating costs for three weeks while the UK’s food, drinks and meat production industries negotiate new supply contracts to secure CO2.
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Kwarteng told MPs: “In a critical intervention like that you have to have a way of exiting the arrangement. That’s why I think in a critical period we needed a very short-term arrangement.”
“I’m confident that we can get other sources of CO2 in that period, there was an immediate crisis and the deal that we reached solved the immediate problem.”
Boris Johnson dismissed suggestions the issues with gas prices could lead to panic buying in supermarkets. The prime minister told reporters in Washington: “I don’t think that will happen. I think we’ve got very good supply chains … and what we’re seeing is the growing pains of a global economy recovering rapidly from Covid.”