Exclusive: Caroline Lucas demands Jeremy Hunt ditches tax handouts to fossil fuel firms

The Green Party MP has set out what she wants to see in the upcoming budget

Caroline Lucas

Green Party MP Caroline Lucas has written to the chancellor Jeremy Hunt arguing for the government to end subsidies for the fossil fuel industry, Left Foot Forward can exclusively reveal. The letter, seen by Left Foot Forward, comes in advance of the budget on March 15.

In her letter, Lucas wrote that it is “simply untenable” for the government to fail to properly tax oil and gas company profits “in the context of the climate and cost of living crises”.

Energy company profits have been in the spotlight in recent months. Shell recorded £32.2bn in profits in 2022, the highest in its history. Similarly, BP saw its profits double to £23bn in 2022.

Lucas has argued that the government is not sufficiently taxing these profits. In her letter, she argues that loopholes in the so-called ‘windfall tax’ on energy companies need to be closed. Under the Energy Profits Levy, energy giants can claim £91.40 in tax relief for every £100 invested, and £109 for every £100 invested in “upstream decarbonisation”. Lucas also highlights that fossil fuel firms are given wider subsidies, tax breaks and other financial support amounting to £12bn a year.

Writing to the chancellor, Lucas said: “In the context of the climate and the cost-of-living crises, it is simply untenable for the Government to continue failing to properly tax oil and gas company profits. I therefore urge you to urgently close the investment allowance loophole in the Energy Profits Levy and end all other tax reliefs, financial support and other subsidies for the fossil fuel industry, in line with the World Trade Organization definition of subsidies.” 

Since last year’s Spring Statement, the government has announced more than 100 new oil and gas licences, and the UK’s first new coal mine in thirty years. Figures from the WMO show that the past eight years have been the eight hottest on record, and the UN Secretary General warned at COP27 that “we are on a highway to climate hell with our foot on the accelerator”. 

Alongside her calls for the government to end tax breaks for fossil fuel companies, Lucas’ letter also calls for the introduction of a series of policy initiatives to address both the cost of living crisis and the climate emergency. She set out five priorities that she wants to see the chancellor address in the forthcoming budget, including continuing to assist people with energy bills, supporting a nationwide home insulation programme, and providing grant funding to councils in order to allow them to deliver zero carbon social housing.

On energy bills, Lucas has called on Hunt to introduce an ‘essential energy guarantee’ approach to energy tariffs, claiming this would allow those on the lowest incomes can meet basic energy needs, while wealthier households which are more energy intensive would pay more.

She said: “Moving forward, there is an urgent need to reform energy tariffs to ensure that no one is faced with fuel poverty and I would encourage you to look at a rising block tariff with either a heavily discounted or a free energy block. The New Economics Foundation propose a new system of “universal basic energy” which would provide a free allowance in order to meet basic needs, with subsequent blocks charged at progressively higher rates depending on energy consumption. This approach recognises that energy is a fundamental need and would provide the greatest support to those on the lowest incomes whilst resulting in slightly increased bills for the richest households, thereby incentivising investment in energy efficiency measures.”

Chris Jarvis is head of strategy and development at Left Foot Forward

Image credit: UK Parliament – Creative Commons

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