Increase investment or face fresh windfall tax, govt to warn energy firms at No10 crisis talks

11 August 2022, 00:37 | Updated: 11 August 2022, 06:07

Invest billions more on renewables and North Sea gas or face another windfall tax, the government is set to warn energy firm bosses.

Crisis talks will take place between energy bosses and the government on Thursday over spiralling costs.

Chancellor Nadhim Zahawi and Business Secretary Kwasi Kwarteng will warn gas and electricity companies that they either invest more in the UK or be hit with another windfall tax, the I reports.

They are expected to demand companies ramp up their investment in renewable energy and in North Sea oil and gas production to help boost the UK's energy security and make it less reliant on hostile foreign countries.

The ministers will also ask executives to submit a breakdown of predicted profits and payouts as well as investment plans for the next three years.

A source told the paper: "The Government is serious, we are going to do the work so that the new prime minister can take the decision on what needs to be done. All options are open, including some form of increase in the windfall tax."

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It comes as energy companies have seen huge profits in recent months, triggering fury among Brits.

Shell, BP and British Gas owner Centrica all announced bumper figures in recent quarters as the cost of living crisis continues to hit struggling families.

Experts at Cornwall Insight forecast that bills are now likely to rise to over £4,200 from January as wholesale prices surge again.

The energy consultancy said it was around £650 more than its previous forecast.

As the situation worsens, there have been calls for Tory leadership rivals Rishi Sunak and Liz Truss to come together with caretaker PM Boris Johnson to find a solution.

Martin Lewis, founder of the website Money Saving Expert, told ITV: "What we’re facing here is a financial emergency that risks lives.

"I accept the point that Boris Johnson is running a zombie Government and can't do much, but the two candidates – one of them will be our prime minister – they need to get together in the national interest to tell us the bare minimum of what they will do."

Minister quizzed over energy bill prices

Ms Truss has revealed during the race that she is opposed to the idea of a windfall tax and allies say they are unlikely to extend the current scheme if she takes her place at No10.

However, she has recently been accused of a "major u-turn" after saying she would consider offering direct payments to struggling households over the cost of living crisis.

Ms Truss previously refused to commit to further handouts, saying she would not "write the Budget in advance" but her priority was driving through tax cuts "from day one" to kick-start the economy.

She told the London Evening Standard on Wednesday: "I can assure you that I will do all I can to help households across Britain.

"I understand how difficult the circumstances are… that people are facing pressure on food bills and fuel bills and with the cost of living."

Govt response to cost of living is 'economic equivalent' to coronavirus

Meanwhile, Rishi Sunak suggested that more cost-of-living support was needed as future situation was on average "£400 worse" than when he made earlier interventions as Chancellor.

While the Tory leadership contender said it was hard to put a "precise figure on it" without official estimates of the price cap, he added: "In order of magnitude it looks like the situation is around £400 worse give or take than we thought when I announced support earlier this year.

"That gives you a sense of the scale of what we are talking about extra and then we have to think about how to we split that up, what do we do for the most vulnerable people on the lowest incomes, what do we do for pensioners, and what do we do for hardworking families."

He later suggested that total support for families could be raised to "£700 to £800" through a cut to VAT on energy bills, on top of existing support.

Mr Sunak said on Monday that he would tackle the crisis using the framework he put in place as Chancellor.

"People need proven methods that will deliver for them quickly. So I will use the framework I created to provide further support and give millions of people the peace of mind they desperately need ahead of the winter,” he said.

"I'm very clear about what is required to help people, and as soon as we know how much bills will go up by, I will act."