UK: Truss announces energy cap but comes under fire for not imposing windfall tax

By Hamed Chapman

London, (The Muslim News): Prime Minister, Liz Truss, announced Thursday that her government would intervene in the energy crisis by annual bills at no more than £2,500 for the next two years but came under widespread fire from opposition parties, fiscal organisations, charities and trade unions for refusing to impose a windfall tax.

The Institute for Public Policy Research said that the scale of action, which has yet to be costed, is laudable but that it was “morally indefensible” that energy companies will be allowed to still reap windfall profits from the crisis.

“Freezing energy prices is necessary, but energy companies will still be making record profits and an expanded windfall tax is not only fair but essential to help pay for this policy. It is morally indefensible that these profits are underwritten by the state whilst households carry the burden,” said the head of the Centre for Economic Justice, George Dibb, at IPPR.

Truss estimated that the average household would save £1,000 in total from October because of the temporary price cap she was imposing and added to the £400 discount previously announced under Boris Johnson before he was forced out of office.

“This government is moving immediately to introduce a new energy price guarantee that will give people certainty on energy bills, it will curb inflation and boost growth,” she told Parliament, adding that it included suspending green levies. She also controversially announced she was allowing fracking to resume despite the environmental concerns.

For the seconded successive day, Labour Leader, Keir Starmer, castigated the decision to not extend a windfall tax on the unexpectedly high profits of energy suppliers to part-pay for the scheme.

“She wants to leave these vast profits on the table with one clear and obvious consequence: the bill will be picked up by working people,” he said in response. He also condemned a lack of action on insulating homes and the focus instead of “doubling down on fossil fuels is a ludicrous answer to a fossil fuel crisis”.

SNP Leader at Westminster, Ian Blackford, said that by using unspecified borrowing and rejecting to impose a windfall tax, the Prime Minister was effectively imposing a “Truss tax” on people who would have to pay more for energy.

Paul Johnson, Director of the Institute for Fiscal Studies, tweeted that he was staggered Truss announced her “energy price guarantee” without saying how much it would cost. “This is one of the biggest announcements in peacetime history, and apparently we’ll be told how much in a few weeks,” he said.

His sentiment was echoed by Torsten Bell, Chief Executive of the Resolution Foundation thinktank, who said he was also surprised by the decision not to give any costings for the policy.

Miatta Fahnbulleh, Chief Executive of the New Economics Foundation further warned that by not imposing a new windfall tax, the government has ensured that “our public services and communities to pay for this through lower investment”.

The End Fuel Poverty Coalition described the plan as an “expensive sticking plaster” and warned that without further investment in improving energy efficiency of homes worst affected by fuel poverty.

Becca Lyon, head of child poverty at Save the Children, said the plan would not stop many vulnerable families reaching crisis point this winter since the capped rate was still double last year’s prices.

Imran Hussain, Director of Policy and Campaigns at Action for Children, said this was a “big intervention with a big hole in it” as there was a desperate need to target more help through benefits for the low paid and those who have lost their jobs or cannot work because of disability, illness or caring responsibilities.

Frances O’Grady, the outgoing TUC General Secretary, also said the Prime Minister is making the wrong people pay and that she should have imposed a much larger windfall tax on profiteering oil and gas giants.

[Photo PM Liz Truss speaking from despatch box House of Commons during PMQs on energy questions on 7 September. Photograph by Jessica Taylor/Copyright UK Parliament]

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