Starmer adviser urges ministers to look at profits cap for energy and petrol firms | Energy industry
The government’s cost-of-living adviser has called on ministers to impose a temporary cap on profits for energy and oil companies to prevent them making excessive money from war in the Middle East.
Richard Walker – Labor peer, chairman of Icelandic supermarkets and Prime Minister’s “Cost of Living Champion” – He said he had asked the government to examine limiting how much businesses can benefit from higher energy prices, following Iran’s blockade of the Strait of Hormuz, a key shipping route for Europe’s oil and natural gas, and wider conflict in the region.
“I have asked the government to set a temporary profit cap to stop manufacturers and retailers taking advantage of the crisis to make windfall profits at the expense of consumers,” Walker wrote in a column in the Sunday Times.
“As chairman of a retailer, I have no problem with profit. It’s what allows businesses to invest, employ people and pay taxes. But I have a big problem with profiteering, especially when families are under real pressure.”
His comments follow suggestions that chancellor Rachel Reeves plans to ease the UK’s current windfall tax. energy gains tax – Before the United States and Israel attacked Iran with airstrikes that killed Iran’s supreme leader Ali Khamenei on February 28.
Bank of England Governor Andrew Bailey will meet Keir Starmer and senior ministers on Monday as part of an urgent meeting to discuss ways to ease cost-of-living pressures brought on by war.
There is growing alarm in Downing Street and the Treasury that a protracted conflict would not only require government intervention to cushion the impact of rising energy bills but would also derail economic growth and eliminate the fiscal gap.
The economic consequences of the US-Israeli war on Iran are making the survival crisis facing British households ever more costly since Russia invaded Ukraine four years ago, and bills are soaring.
While consumers are already facing a sharp rise in petrol and diesel prices, mortgage borrowers can expect higher repayments after Bailey warned Threadneedle Street may need to increase interest rates in response to the inflation shock.
Wednesday’s official figures are expected to show inflation remained at 3% in February. Before the outbreak of war, the Bank had forecast a fall in the headline rate this spring close to its 2% target, helped by measures to reduce energy bills announced in Reeves’ autumn budget. However, last week he warned that he expected inflation to remain above 3 percent this year due to the war against Iran.
Underlining the threat to the British economy, KPMG warned that the economic growth rate could almost halve from 1.3 per cent to 0.7 per cent this year compared to 2025 as the energy shock drives down spending.
If the conflict continues, household energy bills could rise by around 10 percent, potentially even more. High borrowing costs triggered by the war will also increase pressure on government finances and make it difficult for ministers to provide emergency financial support.
Yael Selfin, chief economist at the accountancy firm, said: “The weak growth outlook combined with rising cost pressures will likely lead firms to scale back investment plans next year. Consumers may also cut discretionary spending to offset pressure from higher prices.”
The anxiety in the cabinet is also reflected in the economy in general. The TUC on Sunday called for an emergency taskforce to recall tactics used during the Covid-19 pandemic to help protect the UK from the economic consequences of the US-Iran conflict.
TUC general secretary Paul Nowak said: “The lessons of the pandemic are clear. When unions, employers and government came together we were able to act quickly to protect jobs, keep businesses afloat and provide security for families during an incredibly uncertain time.”
“With the UK and global economy currently facing major shocks from the conflict in Iran, we need the same approach once again.
“We can’t sit back and wait for the damage to happen. We have to go around the table and get ahead of this crisis.”
Chris O’Shea, chief executive of British Gas owner Centrica, said a rise in energy prices could be “inevitable” if the war in the Middle East “stays as it is”, although he predicted oil prices would be hit much harder by energy bills.
“The world uses about 100 million barrels of oil a day. We lost about 20% of that in the Strait of Hormuz. The gas lost due to the closure of the Strait of Hormuz is about 3 or 4% of global gas,” he told the BBC’s Laura Kuenssberg program on Sunday.
“So the impact on gas and therefore electricity bills should be lower than the impact on oil. So my gut feeling is that you’ll see the impact of this more at the gas pumps than on the bills.”
When asked about support to help people with bills, he said Centrica was having meetings with the government and hoped they would seek targeted support. “I think targeted aid is much better than general aid,” he said.
