LONDON – Britain's Conservative government unveiled a 15 billion pound ($19 billion) emergency aid package Thursday to ease a severe cost-of-living squeeze, announcing the plan a day after Prime Minister Boris Johnson vowed to “move on” from a months-long scandal over government parties during COVID-19 lockdowns.
Treasury chief Rishi Sunak said the government would introduce a 25% temporary windfall tax on the profits of oil and gas firms. The tax is expected to raise around 5 billion pounds ($6.3 billion) over the next year to help fund cash payments to help millions of people cope with sharply rising energy bills, Sunak said.
U.K. inflation hit 9% in April, the highest level in 40 years, and millions of customers saw their annual energy bills jump 54% the same month — amounting to an extra 700 pounds ($863) a year on average for each household.
Sunak said the government help will target the most vulnerable, including disabled people and retirees. Some 8 million of the country's lowest-income households will receive a one-time government payment of 650 pounds ($818). Every household will also receive a 400 pound ($503) discount on domestic energy bills in October.
The windfall tax announcement was a U-turn for Johnson's Conservative government, which had previously said that imposing one would deter investment in the U.K.’s energy sector. But the government is under heavy pressure to act as skyrocketing energy and food bills cause financial hardship for British households.
Sunak said the temporary levy would remain in place until “prices return to a more normal level” and would be accompanied by an "investment allowance” to motivate companies to invest in oil and gas extraction in the U.K.
Rain Newton-Smith, chief economist at big business group the Confederation of British Industry, said “the open-ended nature” of the windfall tax “will be damaging to investment needed for energy security and net zero ambitions.”
But unions and opposition parties said the government's help was too little, too late.
“Across the U.K., families and pensioners are scared witless about not making ends meet,” said general secretary Christina McAnea of the Unison union. “The support will make some difference, but not enough."
Britain’s energy regulator said this week that domestic energy bills could shoot up another 800 pounds a year in the fall, as Russia’s war in Ukraine and rebounding demand after the pandemic push oil and natural gas prices higher.
Johnson’s government is trying to turn a page after an investigator’s report on what has become known as the “partygate” scandal slammed a culture of rule-breaking inside the prime minister's No. 10 Downing St. office.
In the report published Wednesday, civil service investigator Sue Gray described alcohol-fueled bashes held by Downing Street staff members in 2020 and 2021, when pandemic restrictions prevented U.K. residents from socializing or even visiting dying relatives.
Gray said the “senior leadership team” must bear responsibility for “failures of leadership and judgment.”
The prime minister said he was “humbled” and took “full responsibility” -- but insisted it was now time to “move on” and focus on Britain’s battered economy and the war in Ukraine.
Johnson still faces an inquiry by a House of Commons standards committee over whether he lied to Parliament when he insisted no rules had been broken in Downing Street. Ministers who knowingly mislead Parliament are expected to resign.
The scandal leaves Conservative Party lawmakers in a quandary: Should they try to topple their leader amid a war in Europe and a financial crisis, or stick with a prime minister whose perceived willingness to flout rules he applies to others has caused public outrage?
Under party rules, a no-confidence vote can be triggered if 15% of party lawmakers — currently 54 — write letters calling for one. If Johnson lost such a vote, he would be replaced as Conservative leader and prime minister. It’s unclear how many letters have been submitted so far, but the number is growing.
Two more Tory legislators, John Baron and David Simmonds, called Thursday for Johnson to resign. Baron said Johnson’s previous claim “that there was no rule-breaking is simply not credible,” and therefore he had misled Parliament.