Cabinet rift appears over prospect of windfall tax on oil and gas profits

The Cabinet minister was adamant that it would be a “disincentive” to investment by energy giants despite his colleague in the Treasury using the threat to encourage spending, as their profits soar along with customers’ bills.

But Mr Kwarteng did not rule out that the move, long called for by Labour, is being considered by the Government as a measure to alleviate the cost-of-living crisis.

He told Sky’s Sophy Ridge on Sunday: “I’ve never been a supporter of windfall taxes – I’ve been very clear about that publicly. I think they discourage investment.”

And he said on the BBC’s Sunday Morning show that “it doesn’t make much sense to me to then hit them (energy firms) with a windfall tax which is arbitrary and unexpected”.

“I don’t think that is the right way, but I would say that is not for me. That is for the Chancellor of the Exchequer,” he said.

Ministers have been resisting taking the action but Mr Sunak caused some surprise by toying with it this week.

“If we don’t see that type of investment coming forward, and if the companies are not going to make those investments in our country and in our energy security, then of course that’s something I would look at,” he said in an online discussion.

Mr Kwarteng was instead trying to pressure North Sea oil and gas firms to reinvest their profits so more drastic action is not required.

He has written to the industry demanding a “very clear plan” to spend profits on accelerating domestic production and clean energy before a meeting in the coming weeks.

Mr Kwarteng told the sector that investing in home-grown energy production is essential to grow the British economy and “crucially bring down consumer bills in the long term”.

Labour said the Government is “rattled” because oil and gas producers are making “soaring profits” while bills rocket.

Shadow climate change secretary Ed Miliband said: “Kwasi Kwarteng’s letter is not worth the paper it is written on for millions of families facing the cost-of-living crisis.

“Families want action to deal with the bills crisis, not a vacuous, insulting piece of political spin.

“The only way to actually make a difference is to do the right, fair and principled thing and impose a one-off windfall tax on oil and gas producers’ profits to provide real help to families now and put in place a green energy sprint in the years ahead.”

Meanwhile, on Sunday, Mr Kwarteng suggested there will not be an “emergency budget” to give further support to tackle the cost-of-living crisis, before walking back on the comments.

He told Ridge: “There won’t be an emergency budget…”

But questioned further, he said: “I’m not ruling it out, it’s not in my power to do that.

“You know as well as I do, and many of your viewers, that budgets are for the Chancellor. All I’m saying is that there’s been a considerable amount of support already.”