UK Slaps Oil, Gas Companies With $6B Windfall Tax

The UK government is introducing a £5 billion ($6.3 billion) tax on the windfall profits of its oil and gas companies, bowing to pressure from campaigners to raise money to help millions of people struggling with the worst cost-of-living crisis in decades, Anna Cooban reported for CNN Business.

Photo Insert: Finance Minister Rishi Sunak unveiled the new 25% tax on the profits of energy producers such as BP and Shell.

Finance Minister Rishi Sunak unveiled the new 25% tax on the profits of energy producers such as BP and Shell on Thursday. The levy will be phased out once oil and gas prices fall back to more normal levels, he said.

"The oil and gas sector is making extraordinary profits, not as the result of recent changes, risk-taking or innovation or efficiency, but as the result of surging global commodity prices," Sunak said in a speech to parliament.

The tax will help fund a new package of benefits worth about £15 billion ($19 billion). Sunak said the government would make one-off direct payments to millions of the country's most vulnerable households.

Around eight million low-income households will receive £650 in two installments later this year, while a further eight million pensioners will receive £300. Companies including BP and Shell raked in a combined $32 billion in profit last year on the back of soaring global oil and natural gas prices.

Russia's invasion of Ukraine in February pushed prices up even further over fears the conflict will lead to energy shortages.

Households have taken a big hit. On Tuesday, the head of the UK's energy regulator said he expected the annual bills for millions of households to jump 40% to hit about £2,800 ($3,500) from October.

That's just six months after the regulator lifted its price cap — the maximum suppliers are allowed to charge customers per unit of energy — by 54%, the biggest rise since it started capping prices five years ago.

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