The government has not ruled out imposing an exceptional tax on energy companies despite the strong opposition of several ministers.
Education Secretary Nadhim Zahawi said the Cabinet was considering “all options” to tackle the cost of living crisis, including a one-off tax on businesses that have benefited from high global gas prices and petrol.
Chancellor Rishi Sunak has not ruled out imposing a windfall tax on energy producers, but ministers including Anne-Marie Trevelyan, Brandon Lewis, Sajid Javid and Jacob Rees-Mogg have criticized the measure as ineffective.
Asked about the imposition of a windfall tax by Sky’s Sophy Ridge on Sunday, Mr Zahawi said: ‘We will look at all options.
“I, together with the Chancellor, the Prime Minister and the Cabinet, will consider all options.”
But he spoke of the impact it could have on older people, adding: “If you apply a windfall tax, (companies) will probably have to reduce or withdraw their dividend.
“Who receives the dividend? Retirees via their pension funds.
“The investment has to be real, which I think Rishi (Sunak) will demand from all these companies and to see a roadmap towards that investment. We are not taking any options off the table.
International Trade Secretary Anne-Marie Trevelyan said the government was encouraging energy producers to invest their profits in green alternatives rather than imposing the tax.
She told Times Radio: “As the Chancellor has said, it’s really important that he can keep everything under control.
“He’s made a very clear position that he wants these energy companies, because they’ve made surprisingly higher profits from these price increases, to use it to invest in the clean energy of the future.”
Ms Trevelyan described a windfall tax as a ‘very short-term measure’, adding: “I don’t think a windfall tax is the most effective way to do anything, I don’t think it advances at a pace”.
Former Chancellor George Osborne has said he believes the government will impose a windfall tax.
Asked about the tax on Channel 4’s Andrew Neil show, he said: ‘I think he (Mr Sunak) will do one, but I have to say it doesn’t really solve the serious tax problem that the country going to have in the next two or three years.
“It’s a one-time cash grab. You have an interesting dynamic where, apparently, number 10 doesn’t want it and number 11 does.
Meanwhile, Michael Lewis, chief executive of E.ON UK, called on the government to “tax those with the broadest shoulders”.
He told BBC One’s Sunday Morning TV program that around one million of E.ON’s eight million UK accounts are already overdue, and that is expected to increase by 50% in October.
Mr Lewis said increasing Universal Credit payments and imposing a “social tariff” on energy companies would reduce the cost of bills for those struggling to pay them.
Responding to E.ON’s forecast of how many people are expected to be in arrears by October, Shadow Chancellor Rachel Reeves renewed Labor calls for the government to urgently impose a windfall tax.
She said: “These comments underscore how difficult the cost of living crisis is for families and how much worse the Tory delays will make the situation worse.
“The government must act now, by introducing a windfall tax on the profits of oil and gas producers to reduce bills.”
Jesse Norman, a former Tory cabinet minister, said he supports a ‘temporary and well-defined’ windfall tax that would be ‘fair’ to consumers, and believes former Prime Minister Margaret Thatcher would have imposed it if she was in charge.
He said on Twitter: “As several current and former oil and gas CEOs have noted, this won’t change much of corporate investment plans or the incentive to invest.”
“It is also completely wrong to say that a levy or tax of this type would not be conservative,” he added.
“On the contrary, it would be both ethical and pragmatic.
“For what it’s worth, though she rightly wouldn’t have liked the idea very much, I am convinced that Margaret Thatcher, in her pragmatic heyday, would have levied a limited, temporary tax of this sort.”
Labor has also warned that schools in England could pay around £1billion a year in energy bills, taking money away from student learning.
The party said children’s futures were at risk, citing government data that showed the cost of energy for public schools after a projected 93% increase by the end of 2021.
On average, secondary schools are now estimated to spend more than £161,000 on energy, while primary schools spend around £32,000, according to data compiled by the House of Commons Library.