Windfall Tax
May 2022
On the substance, there are strong arguments for and against windfall taxes. The energy companies are indeed making exceptional profits as a result of high global energy prices. Clearly it would help raise money, although Labour’s tax would actually raise fairly small amounts by national standards (for example, not enough to fund the £150 per household council tax rebate the Government has already made). There is a risk that it would make the UK seem unreliable to businesses, and deter long term investment not just in energy but other industries. However, a Conservative government has introduced a windfall tax before – Margaret Thatcher introduced one on banks.
Oil and gas companies are currently seeing extraordinary windfall profits due to global spikes in commodity prices, driven in part by surging demand after the pandemic and Russia’s war. As a result of high energy prices, millions of households across the UK are struggling to make their incomes stretch to cover the rising cost of living. That is why the Government last week introduced its Energy Profits Levy (which others have called a windfall tax) which will be charged on profits of oil and gas companies at a rate of 25 per cent, on top of the existing 40 per cent headline rate of corporation tax, raising around £5 billion over the next year to support households. It will be temporary, and as the oil and gas price decreases to normal levels, the Levy will be automatically phased out.
The Government is sympathetic to the argument that such taxes should be designed in a way they do not deter investment, which is critical to growing our economy. This is why significant investment incentives will be built into the new Levy. A new Investment Allowance will double the overall investment relief for oil and gas companies, so companies will have a significant incentive to reinvest their profits. For every £1 an oil or gas company invests, they will pay 91 per cent less tax – so the more a company invests, the less tax they will pay. This relief will be available straight away, rather than waiting for profits which is normal for existing investment reliefs.
The Government will also examine the scale of large profits made by the electricity generation sector and consider the appropriate steps to take.
Channel 4
March 2022
Channel 4 is entirely commercially funded, but it has been publicly owned since it began broadcasting. The main reason it was set up as a publicly owned, commercially run station was to provide greater choice. Today though, audiences can now watch what they want, whenever they want, how they want, across a range of internet-enabled personal devices.
The independent production sector has also grown enormously so that it now supplies content to a wide range of broadcasters and streaming services. The Culture Secretary, after careful consideration and public consultation, has decided that Government ownership is holding Channel 4 back from competing against streaming sites such as Netflix and Amazon. I understand further details will be set out in a White Paper in due course and I look forward to reading them. The Culture Secretary has also been clear that she will seek to use the proceeds of the sale to level up the creative sector.
By investing money into independent production and creative skills in priority parts of the country, this will deliver a creative dividend for all. The UK made more films than Hollywood in the last quarter of 2021 and with many more studios opening in the UK, delivering funding will be key.
Access to Cash
March 2022
Cash remains an important part of daily life for millions of people across the UK, which is why the Government has committed to legislate for the protection of access to cash.
As of October 2021, LINK reported that there were around 41,000 free-to-use ATMs in the UK. More broadly, the Financial Conduct Authority reports that as of the second quarter of 2021, nearly 96 per cent of the UK population are within 2km of a free-to-use cash access point.
Following a detailed consultation, the Government intends to support the continued use of cash in people’s daily lives and help to enable local businesses to continue accepting cash by ensuring they can access deposit facilities. Having already facilitated the wide-spread adoption of cashback without a purchase through the Financial Services Act 2021, the Government will set out next steps in due course.
Although schemes such as Community Access to Cash have been very successful, I hope that future legislation will ensure the needs of cash users are understood and continue to be met by industry, including large and small retailers.
Beer Duty
January 2022
The Autumn Budget 2021 confirmed that duty rates on beer, cider, wine and spirits will be frozen for another year, a move which will save consumers £3 billion over the next five years, and provide further support to the hospitality industry and its suppliers as they recover from the pandemic. Duty rates on draught beer and cider will be cut by 5 per cent, taking 3p off a pint and further supporting pubs.
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