A windfall tax on energy company profits would lead to even higher rates for businesses and households and discourage investment, a minister said today.
In an interview with The Telegraph, business secretary John Hutton said imposing a windfall tax would force energy companies to pass on the added costs to their customers.
However, Hutton said the ‘era of cheap energy’ is over, adding that consumers have ‘benefitted considerably’ from low energy prices in recent years.
Hutton also ruled out demands by Labour MPs to impose a one-off tax on ‘excessive profits’ by energy companies, saying such a tax could damage the economy.
“What we shouldn’t do is create a climate that makes it harder to attract new investment,” he said. “We need £100bn plus in the next 10 years, so we’ve got to create the right framework that encourages investment. We must not lose sight of that.”
Hutton’s comments echoed those of Chris Hannant, acting director of policy at the British Chambers of Commerce (BCC), who warned on Tuesday that a windfall tax could pose a long-term threat to businesses.
“A windfall tax would be a knee jerk reaction that will only serve to create instability in the market and deter vital investment,” he said.
“Taxation should be stable and transparent. The use of arbitrary taxes should never be encouraged – longer term they create uncertainty and harm the economy.”
© Crimson Business Ltd. 2008
