The windfall tax plan has led to fuel poverty for many as UK weavers

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By Bill Lehan

(Bloomberg) –

A windfall tax on the profits of UK power companies will come “at cost,” a top cabinet official said, highlighting divisions among Prime Minister Boris Johnson’s allies over measures that could reduce the country’s cost of living.

Nadeem Jahavi’s remarks came on Sunday when the chief executive of a major UK power supplier warned that millions of families were at risk of falling into “energy poverty” and a think-tank said low-income families were at a disadvantage.

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Chancellor Sage Sunak favors a variable windfall tax that will charge energy companies at different rates – whose profits are rising thanks to the skyrocketing oil and gas prices – depending on how well companies are willing to invest in new energy, the Sunday Times reported.

Under the proposal, companies such as BP Plc and Shell Plc would face lower tax rates if they promised to dramatically increase funding for new facilities, the report said.

Asked about the possibility of a variable windfall tax, UK Education Secretary Zahwei told Sky News that the cabinet would look into all options available to it.

“Investment has to be real, which is what I think [Sunak] Will demand, ”he said. Jahavi said the government “needs to see a roadmap for this investment.” He said there was “no zero-cost option” available.

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A growing list of Sunak colleagues has criticized the idea of ​​a windfall tax, which discourages energy companies from investing in Britain. Northern Ireland Secretary Brandon Lewis and Health Secretary Sajid Javid both spoke out against the proposal this weekend, the fifth and sixth ministers reported last week, the Sunday Telegraph reported.

Business Secretary Quasi Quarteng, Foreign Secretary Liz Truss, Attorney General Suela Braverman and Brexit Opportunity Secretary Jacob Rees-Mug are opposed to the idea. A windfall tax could represent victory for labor if it goes ahead; The UK’s main opposition party has been pushing hard to impose tariffs.

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At the heart of Britain’s worst inflation in 40 years is rising fuel bills, which have pushed consumer prices up 9% since April.

Michael Lewis, chief executive of E.ON UK, told the BBC that many families were facing “fuel poverty” due to the unprecedented rise in fuel prices. This means they spend more than 10% of their income on energy bills.

Lewis said 40% of E.ON’s 8 million customers in the UK could fall into energy poverty by October without significant action by Johnson’s government. He called for an increase in payments for the Universal Credit and Warm Home Discount Scheme.

“It’s very, very difficult, especially for people with benefits or very low incomes,” Lewis said. “Some people are on the edge. They just can’t pay, and it will only get worse if prices rise again in October. ”

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October marks an important tipping point because prices will rise further when energy regulator Offgame adjusts its cap on energy bills for the second time this year.

According to an analysis by the Resolution Foundation published on Sunday, the rising energy bill since the record began in 2006 is already widening the living gap between Britain’s richest and poorest families.

According to the think tank’s analysis, headline inflation is now 10.2% for the poorest tenth household, compared to 8.7% for the richest household.

“Rapidly rising food prices and rising energy bills drive recent inflation, and low-income households are on the brink of this pressure,” said Jack Leslie, a senior economist at the foundation.

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