UK must pay for household support without deterring investment

By Muvija M

LONDON (Reuters) – Britain must pay for increased support to households in a way that does not deter investment, Cabinet Office minister Steve Barclay said on Thursday ahead of an expected announcement of new measures to cope with rising energy bills.

“In terms of paying for that, as we look at the balance between how much is done through debt, and how much is done through revenue raising, we need to do that in a way that doesn’t deter investment,” Barclay told Sky News.

Later on Thursday, finance minister Rishi Sunak will set out more details of the government’s response to the growing cost-of-living pressures facing households.

This is expected to include a 10 billion pound ($12.6 billion) package of support, an energy industry source said, funded in part by a windfall tax on oil and gas producers companies.

Barclay said the government had decided to act after an announcement by the energy regulator earlier this week that a cap on gas and electricity bills was set to rise by another 40% in October.

“What we do recognise … is the government needs to have targeted support, particularly for those most affected by those higher bills,” Barclay told the BBC.

Global gas prices soared last year when the reopening of world economies from pandemic lockdowns caused demand to return sharply and supply could not keep up. The war in Ukraine has pushed up prices further in 2022.

The government has previously said it is opposed to a windfall tax on energy suppliers because it would deter them from investing in new energy projects.

But that position has shifted as political pressure for action has mounted, with soaring inflation and rising bills pushing many household budgets to the limit.

Prime Minister Boris Johnson is also keen to move the conversation away from a damning report detailing a series of illegal lockdown parties at his Downing Street office.

The opposition Labour Party has campaigned for a windfall tax on oil and gas companies to raise around 2 billion pounds ($2.5 billion), with opinion polls showing public support for such a move.

Asked about a windfall tax, Barclay said he disagreed with the Labour proposal, but declined to give any further details of the government’s new plan, saying it was for Sunak to set out the details to parliament later.

Sunak is expected to speak around 1030 GMT.

($1 = 0.7963 pounds)