New UK Prime Minister Liz Truss has rejected the idea of using a windfall tax on oil and gas giants to reduce energy bills for households, saying the country will not be able to “tax its way to growth.”
At her first Prime Minister’s Questions in the House of Commons on Wednesday, Truss pledged to set out a plan on the next day to save households and businesses from financial ruin as a result of soaring energy bills.
She said the government will “help to support businesses and people with the immediate price crisis, as well as making sure there are long-term supplies available.”
Sir Keir Starmer, leader of the main opposition Labour Party, pushed for a levy on the “excess profits” that oil and gas producers have received as a result of high global energy prices, but Truss rejected the idea.
Tax Versus Borrowing
Starmer questioned Truss on how the government is expecting to fund the relief package if it is not going to raise taxes as “the money has got to come from somewhere.”He said refusing to tax the profits made by oil and gas firms would leave taxpayers footing the cost of the extra borrowing for decades.
“More borrowing than is needed. That’s the true cost of her choice to protect oil and gas profits, isn’t it?” he asked.
The prime minister replied: “The reality is that this country will not be able to tax its way to growth.
“The way we will grow our economy is by attracting investment, keeping taxes low, delivering the reforms to build projects quicker. That is the way that we will create jobs and opportunities across our country.”
Fracking Ban
Downing Street also hinted that the government may lift the ban on fracking in its attempt to increase Britain’s domestic energy supplies.At the beginning of this year, energy company Cuadrilla announced that the UK’s only two shale wells were to be abandoned. But Russia’s invasion of Ukraine pushed energy prices and security to the top of the agenda, prompting calls for the government to rethink the moratorium it had imposed on fracking in England in 2019.
In her campaign to become prime minister, Truss said in an interview: “I support exploring fracking in parts of the United Kingdom where that can be done.”
On Wednesday, the prime minister’s press secretary said: “She made clear her position during the campaign but I’m not going to get into what’s in this energy package.”
He insisted that the Conservative Party’s 2019 manifesto—which said the Tories will not support fracking unless the science shows categorically that it can be done safely—still stands in full.
