Windfall tax: Prioritise fuel security to mitigate future energy price spikes
Chris Denning · February 15th 2023 · read
There have been recent calls (from the Labour party) for the UK’s windfall tax to increase in response to record breaking oil and gas profits. A better course of action at the Spring Budget would be to focus on improving the UK’s long-term fuel security to mitigate future energy price spikes.
The government is unlikely to heed the calls to increase the energy windfall tax at the Spring Budget. Increasing narrowly targeted and supposedly short-term windfall taxes will undermine business and investor confidence and will do nothing to solve the wider energy and cost of living crisis facing the UK.
Indeed, wholesale gas prices have fallen in recent months as consumers have adjusted in response to last year’s price spike. Given this, increasing the windfall tax (currently at 35%) makes even less sense and potentially discourages new investment in energy innovation.
Instead, governments, including the UK government, should be focusing on improving fuel security and move away from being reliant on imported gas which has created the current market conditions, which the oil and gas and renewable energy companies have simply responded to.
The UK government should use the Spring Budget to incentivise new investment in grid infrastructure, better connectivity and scalable energy storage capacity. Doing so would help shelter the UK from the short term price volatility seen across Europe in the last year and bring long-term stability to energy prices.
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