Analysis: How Calls For A Windfall Tax Have Exposed Deep Splits In The Tory Party

·4 min read
Voters are seeing their energy bills soar (Photo: Peter Byrne via PA Wire/PA Images)
Voters are seeing their energy bills soar (Photo: Peter Byrne via PA Wire/PA Images)

Voters are seeing their energy bills soar (Photo: Peter Byrne via PA Wire/PA Images)

Few issues in recent years have done more to expose the Conservatives’ ideological confusion than how best to respond to the cost of living crisis.

At the 2019 general election, Boris Johnson secured an 80-seat majority by managing to unite traditional Labour voters in the north with old-school Tories in the south, thanks largely to his pledge to “get Brexit done”.

As a result, the prime minister now leads a government seemingly wedded to big state intervention on the one hand, while trying to present itself as a tax-cutting administration on the other.

Something inevitably had to give, and Labour’s calls for a windfall tax on oil and gas companies has proved to be the catalyst.

Like a rabbit in the headlights, the Conservatives seem unable to decide how best to address the public’s concerns over soaring energy bills and food prices.

Opinion polls suggest a one-off levy on the astronomical profits being enjoyed by energy firms, with the billions raised being used to bring down bills, is wildly popular with the public.

Nevertheless, a succession of ministers have been forced onto the airwaves in recent weeks to argue against such a move on the grounds that it would deter investment in areas like green technology.

Tory MPs were also forced by party bosses to vote against a windfall tax in the Commons last week.

Scratch the surface, however, and you quickly realise that there is no unanimity in the Conservative ranks.

A succession of MPs from all wings of the party have said, publicly and privately, that they have come round to the idea of a windfall tax.

The most recent was former Treasury minister Jesse Norman, who said even Margaret Thatcher would have supported one, given the circumstances.

Pointing out that the same companies currently rolling in cash had benefited from taxpayer support when oil prices plummeted in 2014, Norman said: “Do they think oil and gas companies should enjoy a one-way bet, in which they benefit from public support when prices fall but make no extra contribution when prices rise?

“It is also quite wrong to say that a levy or tax of this kind would be unconservative. On the contrary, it would be both ethically principled and pragmatic. And it would burden future generations less than incurring more debt.”

Rob Halfon, a former minister and chair of the education select committee, said: “I think a windfall tax is the right way forward. We live in extraordinary times. We need to raise money every way we can without increasing the national debt.”

Another Tory MP told HuffPost UK: “The current situation doesn’t feel sustainable. The oil and gas companies are making enormous profits out of events that are completely out of their control. How can we be the only people defending them?”

Rishi Sunak is understood to have finally come round to the idea of a windfall tax, albeit one which would be applied at a lower rate on those companies which invest more of their profits in new technology.

Downing Street, however, remain unconvinced, with two of Johnson’s closest advisers, David Canzini and Andrew Griffith believed to be vehemently opposed.

According to the Sunday Times, No. 10 communications director Guto Harri has said the choice facing ministers is whether to administer the “pain relief” of immediate help with people’s bills, or to perform “surgery” to benefit the economy in the long-term.

But one Tory MP observed: “You usually give pain relief before surgery.”

An ally of the PM told HuffPost UK: “We are all exploring every option available to grow the economy and ease the cost of living,” a senior Number 10 source told HuffPost UK. “It’s not the case of one lot advocating and another blocking.

“It’s just good government – testing the arguments, exploring the merits, getting the detail right and setting the bar high for doing something no Conservative instinctively wants to do.”

Another senior backbencher summed up the dilemma facing the government as it ponders how best to tackle the cost of living crisis.

“Tory MPs are getting fed up of being a high spend, big state party,” the MP said. “The definite sense of MPs and donors is that people are sick to death of not being a Conservative Party.”

Boris Johnson and Rishi Sunak must decide whether to bring in a tax to put billions straight into people’s pockets, or to turn their back on immediate popularity and stick to the strategy of boosting the economy in the long-term.

Their decision will go a long way to deciding the Tories’ fate come the next election.

This article originally appeared on HuffPost UK and has been updated.

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