Liberal Democrats demand “Robin Hood tax” on oil and gas super-profits

Liberal Democrat Leader and former Energy Secretary Ed Davey has called for a “Robin Hood” tax on the super-profits of oil and gas firms to raise money to support millions of families facing soaring energy costs.

The proposed one-off levy would raise an estimated £5 billion from companies that are making record profits from soaring energy prices. This would be used to support vulnerable families facing a crippling 50% increase to their energy bills.

Earlier this week it emerged that Russian energy giant Gazprom’s trading arm, based in London, has cashed in a £179 million dividend. Meanwhile, the boss of BP has described his company as a ‘cash machine’ after soaring oil and gas prices boosted its profits to £2.4 billion in the third quarter of 2021 alone.

Ed Davey, who as Energy Secretary developed a strategy to tackle fuel poverty, says the money raised through this “one-off” tax could fund a substantial package of emergency support to help over 17 million people with their heating bills.

The current Warm Homes Discount would be more than doubled to £300 and offered to all 7.5 million vulnerable and low-income households on Pension Credit and Universal Credit. The Winter Fuel Allowance offered to pensioners would also be doubled to £600 for one year. This would support 11.3 million elderly people who are seeing their state pensions slashed in real terms by the government’s broken election promise on the triple lock.

Liberal Democrat Leader Ed Davey said:

It can’t be right that a few energy fat cats are raking it in from record gas prices while millions of people can’t even afford to heat their homes.

A Robin Hood tax on gas and oil barons would provide vital cash to support vulnerable families facing crippling energy price hikes.

For years the Conservatives have ignored this problem and failed to take the bold action we need to reduce fuel poverty. Boris Johnson cannot look the other way any longer while families face an impossible choice between heating and eating.

We need a substantial package of support now that provides immediate support to those struggling to get by, while helping people insulate their homes to slash heating bills in the long term.

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17 Comments

  • Lorenzo Cherin 6th Jan '22 - 1:18pm

    This is very much the kind of thing needed.

    As a Nottingham resident for years, to me, it is good the party leader Sir Ed from Nottinghamshire , alludes to that radical social liberal figure, Robin Hood!

  • Neil James Sandison 6th Jan '22 - 1:49pm

    Good call from Ed Now how do we back this up with a campaign , remember the worst of the winter is yet to come and more price hikes are promised .

  • John Marriott 6th Jan '22 - 2:54pm

    Yes, let’s ‘rob the rich to pay the poor’. It makes that winter fuel allowance look like small beer, doesn’t it?

  • I think “windfall taxes” are a terrible idea in general. This one is no exception.

    The upstream energy companies take the risk of drilling for oil not knowing whether the price will be low or high. If it become high, that is their good fortune; they pay tax on their profits at the normal corporation tax rate and there is no justification for additional tax.

    Extra taxes just because companies make more money due to market fluctuations is the way to gradually kill free market capitalism and risk taking.

    I am disappointed Ed Davey has put this bad idea forward.

  • Does the proposed “Robin Hood” tax address the underlying cause of rising energy prices? I think not! It looks more like a hastily applied sticking plaster. Also I agree with Mohammed Amin about windfall taxes.

    I suggest there are two important issues at play here that should alarm all Lib Dems.

    The first is that the media simply isn’t doing its job of ferreting out and explaining the facts. Take the piece linked below from the BBC of just before Christmas for example. Under a subheading of “Why are gas prices so high”? it says blandly “There has been a worldwide squeeze on gas and energy supplies” and gives reasons that include that winter is cold (who knew?) before going on to skate over “geopolitical issues at play”. It’s only saving grace is that it does include a graph showing how wholesale gas prices moved in 2021, an over 800% rise before faling back. Post the end of that graph they fell back further but have since risen again.

    https://www.bbc.co.uk/news/business-58090533

    These prices are already causing immense harm – not just to individuals (the focus of all media coverage I have seen) but also to the economy. At current prices most of UK + EU energy intensive industries will soon close, in many cases for good. Much of Europe’s aluminium industry has already closed and other sectors will follow.

    Why is such an important story not dominating the news? I think it can only be because someone is leaning hard on the media not to report it. And a healthy democracy simply cannot allow that.

    So, Ed Davey’s first priority should be to call out the media and demand they do their job. But beware the trap of calling for reform of the BBC with this government in charge – the Tories would love that! He should simply demand they do their job and make it too embarrassing for them not to. That would put them on notice to report better on other stories too and thereby anchor the whole MSM agenda slightly more to reality.

  • The second important matter this raises is the one skated over by the BBC as ‘geopolitical issues’.

    The underlying cause of the price rise is the US’s undeclared war on Russia and its determination at any cost – apparently including its allies’ populations and economies – to harm Russian gas exports which provide roughly 1/3 of Western Europe’s supply. And because gas has become the favoured fuel for generation in conjunction with renewables, any problem with gas immediately impacts Europe’s electricity supply and prices.

    The particular locus of dispute is the ‘Nord Stream 2’ (NS2) pipeline that runs under the Baltic Sea from Russia to Germany so avoiding any intermediate countries, especially the Ukraine through which the main existing pipeline runs.

    NS2 was completed last year and should be working at full capacity but hasn’t yet started up. The official reason is that the German regulator is still checking it out but that’s not a credible reason IMO. Someone is applying a lot of political pressure behind the scenes.

    Also, it seems that European buyers were persuaded last year to switch from buying mainly on long term contract to spot – meaning buying more or less on the day. Doh! Like him or loathe him, Putin is a master strategist, so he just waited for winter and refuses to do any more spot sales or to supply via the Ukraine except for the remaining life of existing contracts – which are steadily expiring.

    So, Europe has to pay nose-bleed prices to import gas in Liquified Natural Gas (LNG) tankers with many reportedly changing their destination from the Far East mid-voyage so, yes, wholesale prices are high worldwide – but the source of the problem is in Europe.

    Meanwhile also, Blinken, the US Secretary of State, thinks this situation is going to put Russia under extreme pressure. I’m not sure what he smokes but he should give it up. Russia’s economy is largely self-sufficient so all that’s at risk is the investment in NS2. Europe however needs that gas.

    And no doubt when the dust settles European buyers will pay the added costs of the delayed opening of NS2 in the price of the gas they buy.

  • An excellent strategy to compound the problem!
    Do you want Russia/Gazprom and others to supply gas to the UK or not?

    Fact of the matter is it has been known for at least 50 years that the only way fossil fuel energy prices would go is upwards – classic market forces, O-level economics. the current surge has been brought about by the increasing demand from Asia and other parts of the world for a resource which has for many years been known that we are passed peak discovery.

    So get used to market forces, the price is set to effectively double from it’s pre-October 2021 price in the coming year. In fact given the commitment to climate change targets we should celebrating and be pushing the government to get moving on massively reducing our energy consumption. Remember we’ve been paying a green surcharge for decades and not a lot seems to have happened… ie. we’re posting in this mess because of decades of poor decision making at Westminster.

  • Matt Haines 7th Jan '22 - 8:12am

    @Mohammed, I would agree with you if you can safely say no tax breaks or bailouts are provided to those same companies when times aren’t good?

    If they have ever received government intervention that benefits them at the expense of the taxpayer, they they should expect government intervention to benefit the taxpayer at their expense.

  • Nigel Quinton 7th Jan '22 - 8:48am

    I agree with Mohammed above – and if windfall taxes are to be used then the obvious target are those companies that have made millions from Covid.

    We should be backing Dale Vince’s call to remove the energy surcharges from consumer bills.

    And thanks Gordon for some very good points on the bigger picture. Totally agree. Note that it is in both Russia and US financial interests to maintain these geopolitical pressures on prices.

  • Harry Finch 7th Jan '22 - 9:39am

    `So get used to market forces, the price is set to effectively double from it’s pre-October 2021 price in the coming year. In fact given the commitment to climate change targets we should celebrating and be pushing the government to get moving on massively reducing our energy consumption`

    You prepared to put that in a leaflet?

    Because I’d love to do a leaflet saying how declinist this position is. Most people don’t believe in climate change as an emergency – there’s now a `cost of living` crisis.

    Here’s one way you can help – reform the DWP. As vacancies sky rocket why not make DWP officers a conduit for channelling people into jobs? Just get people working and contributing. At least there’ll be mitigation about being covid under-privileged.

    Shale/Nuclear and other developments – much better to be energy self-reliant than relying on Putin.

  • David Garlick 7th Jan '22 - 10:33am

    Great call. We need to stop exploration and hitting profits is ideally suited to drive investors away. Helps the energy crisis is a bonus for me.

  • Barry Lofty 7th Jan '22 - 10:51am

    My selfish hope is that my wife and I can manage to keep warm and the power on for what’s left of our life and also hope all these wonderful new energy sources prove to be as successful as forecast for the sake of future generations.

  • Ed, have you forgotten that you told this party’s conference in 2014 that “Labour’s proposed winter energy price freeze would destroy the stability of the energy sector.”

    Remember how you believed that political interference in energy prices would adversely affect investors at a time of uncertainty in the energy sector including the long-term wholesale prices of gas and oil and that, in your words, ““When some politicians play fast and loose with this (stability), it undermines the public consensus we are trying to achieve.”

    Oh, sorry, different time; different party!

  • Am entirely supportive of the statement.
    In the longer term we need to avoid talking in abstractions. Decisions are made by people. Corporations cannot make decisions. The people running them can. In the same way Governments cannot make decisions. The people running them can.
    We need to look at the realities. We need to be planning for a sustainable future. At present we are failing to plan we are simply avoiding issues and hoping for the best.

  • To clarify: the UK buys very little gas directly from Russia; most of ours comes from domestic fields (now declining sharply) and from Norway. But… we are very much connected to the European market, directly via pipelines and indirectly via electricity interconnectors. And if mainland Europe prices are higher, where do you think Norway will send its gas? And we now generate most of our electricity from gas when there is little wind or sun.

    Clearly, better insulation etc. is a no-brainer but retrofitting will take many years. This is a crisis that will play out over weeks and months so what we might achieve in increased efficiently in 10 or 20 years is utterly irrelevant to the problem in hand which is that the UK + EU are paying nosebleed prices that, if continued a few months, will kill off much of our industry, especially firms that compete in export markets. And if UK and EU stop making stuff, the Chinese will gladly take over – using mainly coal-fired power.

    Similarly nuclear. Hinckley C is taking ~10 years to build while the newly govt-sponsored Rolls Royce initiative to adapt their submarine reactors for civil use will take years to come to fruition.

    Also, it is entirely wrong to imagine this is a problem of reserve depletion causing buyers to bid up prices of diminishing reserves. Russia alone can supply W European needs for > two decades (primarily from gas fields in the Yamal peninsula of Western Siberia) giving us enough time for us to develop better low-carbon alternatives. Russia, of course also supplies China but that is from East Siberian gas fields with different pipelines, so they are different markets.

    As I said before, the price spike is a geopolitical struggle, partly it appears intended to harm Russia and probably also aiming to create a lucrative new market for fracked gas from the US. But from a buyer’s POV it’s no contest. Transport via LNG tankers costs more than pipelines so Russian gas is cheaper. LNG tankers are the first choice only where there is no feasible pipeline (e.g., Australia to China) but are more flexible in that they can sail anywhere. So, it’s in the interest of suppliers AND their customers to go for pipelines where possible with fixed long-term contracts that give both sides the security to make the necessary huge investments.

  • @Harry Finch – “You prepared to put that in a leaflet?”
    Effectively it already has been put in leaflets, in the form of ‘green’ initiatives leaving the shortages and price increases unspoken.

    So I suggest the policy is to push for solar voltaic and solar thermal panels to be installed on all council and social housing (I’m ignoring air-heat pumps as I suspect these will create more problems than they solve) and given the issues we have experienced with CoViD massively improved (and energy efficient) ventilation and air circulation systems.

  • Petroleum Revenue Tax was introduced in the aftermath of the 1973 energy crisis and was intended to ensure “fairer share of profits for the nation” from the exploitation of the UK’s continental shelf, while ensuring a “suitable return” on the capital investment by oil companies. PRT was permanently reduced to zero from 1 January 2016. Perhaps that zero rating should be revisited and this form of Land Value Tax reinstated.

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