Removing the tax incentive loophole in the government’s energy profits levy would have generated at least £22bn in additional revenue.
The investment incentive loophole allows oil and gas firms to claw back more than 91% of their capital investment in the form of tax relief.
This then incentivises further investment in exploring and extracting more oil and gas that will worsen climate change and do little to address the energy crisis. The loophole has already been exploited by companies including Shell, which paid no windfall tax this year despite the tax operating since May.
As reported exclusively in the Independent, closing this loophole alone could pay for emergency insulation measures for 3.31 million households and cut energy costs by £336 per year per household next year.
Produced by the New Economics Foundation for the Warm this Winter coalition, which includes End Fuel Poverty Coalition, Possible, Uplift and Green Alliance, the report analysed the savings from a programme of tax and spend that the Chancellor could have chosen instead, focusing on energy efficiency and insulation.
Previously the End Fuel Poverty Coalition has indicated that the cost of keeping everyone warm this winter would be in the region of £14 billion.
The research also outlines how, if the government got on with the job of more than tripling installed capacity of onshore wind, offshore wind and solar by 2030, then there would be £28.5 billion of savings to the UK’s energy system by 2025. If the government unblocks onshore wind and avoids restricting new solar energy projects, this would save an additional of £3.1 billion by 2025 compared to the current scenario.
Polling conducted by Survation to coincide with the research found that 85% of people in the UK support a windfall tax to invest in insulation and lower energy bills.
Amongst those who voted Conservative in 2019, 85% supported these measures, and among those who intend to vote Conservative in the next election 87% of people supported this. 81% want to see the government speed up the development of onshore wind and solar energy to less reliance on gas.
The findings are being released on Fuel Poverty Awareness Day and as the government considers an amendment to the Levelling-up and Regeneration Bill that would remove the ban on onshore wind in England, and as the government is consulting on a £1bn programme on energy efficiency.
A spokesperson for the End Fuel Poverty Coalition, commented:
Millions of people are now condemned to facing the misery of living in cold damp homes this winter, but these calculations show that these are political choices.
The Government has plenty of room to help out.
Not only could the solutions proposed by the Warm This Winter campaign save households money and alleviate some of the worst effects of fuel poverty this winter, but they would be cost neutral to the Government.
Sadly the Government chose a different path and now will have to brace itself for a fuel poverty-led surge on the NHS this winter.
Alethea Warrington, campaigns manager at climate charity Possible, said:
Getting off gas for good with renewable energy would cut energy bills and emissions, helping us to build a safer future for all.
Oil and gas producers are raking in record profits, even as people’s homes get colder and our climate gets hotter.
Despite this, the government is still resisting unblocking onshore wind, even though it’s a vital source of clean, cheap energy which is highly popular across the UK.
We need urgent action to get on with the job of delivering clean energy and insulation so we can end reliance on polluting, expensive gas.
Tessa Khan, director of Uplift, said:
For a small fraction of the money this government is prepared to spend subsidising gas fields and on expensive gas imports, it could be investing in sensible solutions that will end up saving the Treasury money and lead to permanently lower bills for households.
Practical, proven measures, like home insulation and affordable onshore renewables are what this country needs, not more wasteful deals with profiteering gas giants that are pushing millions into fuel poverty. The first priority of this government must be to the people in the UK, not their profits.
Emmet Kiberd, economist at NEF, said:
Warm this Winter’s proposals would boost growth, create jobs and help us meet our national net zero commitments and could be fully funded by making oil and gas firms pay their fair share in windfall taxes.
Removing the investment incentive for oil and gas firms would easily fund a £3.6bn programme of energy efficiency improvements over the next two years, while still leaving the oil and gas sector with profits after tax around the normal level.