The Institute for Public Policy Research (IPPR), a think tank welcomes the government’s “commonsense U-turn” on windfall tax but says tax breaks for North Sea investment point in the wrong direction.
However, it says the benefit uplift should be permanently “baked in” so millions of households don’t face repeated uncertainty over months ahead and that this “sticking plaster” approach fails to address long-term problems of the welfare system and the economy.
IPPR has welcomed overdue steps to protect the poorest families from the impact of the cost of living crisis but says more is needed – including making the temporary measures permanent to reflect continuing expected rising prices over the next two years.
The think tank, which has argued for months that a windfall tax on excess oil and gas profits was needed, said the plan to give tax breaks likely to be used for North Sea extraction would undermine the drive to reach net zero.
Commenting on measures aimed at providing extra help to families, Rachel Statham, IPPR associate director for work and the welfare state, said:
“The chancellor needed to meet three tests on his measures to increase household support. First – does the level of support go far enough to plug the hole in families’ budgets? The answer is yes – for now.
“Second – will support reach those who need it most? Here too we’ve seen a welcome change of direction.
“Third – is the support offered a sticking plaster or a safety net? This is a living standards crisis of historic proportions – and those on the lowest incomes are most exposed. We need to see support that can keep families afloat not just this year, but into the future. Today’s measures offer temporary relief, but any long-term solution must ensure our social safety net is fit for purpose.”
On the windfall tax on excess profits from oil and gas, Luke Murphy, IPPR associate director for energy and climate, said:
“This government’s decision to levy a windfall tax on oil and gas firms is a welcome U-turn in the direction of commonsense. However, giving these firms even bigger tax breaks to extract more oil and gas will lock in greater dependance on fossil fuels – this is bad for future energy bills, our energy security, and our environment.
“Now it’s sought to address the immediate challenges, this government must focus on the root causes of our energy problems and bring forward a serious plan to reduce our reliance on fossil fuels which its so-called energy security strategy failed to deliver.
“That means backing the cheapest and quickest form of clean energy in onshore wind and investing in a mass homes upgrade programme to make people’s homes warmer, cut energy bills, and reduce our dependence on gas.”
On overall support for the economy and the risk of recession, Dr George Dibb, head of the IPPR Centre for Economic Justice, said:
“Today the government is belatedly rising to the cost of living crisis and has stepped in with welcome support for households. Consumer spending drives the economy, so supporting squeezed family budgets is vital to avoid a costly recession.
“The chancellor is wary of permanent increases in government support and everything announced today is a sticking plaster. With a government that lurches from crisis to crisis and energy prices remaining high into 2023, vulnerable families and businesses will be looking to the Chancellor to come back to the Commons in the new year. A better solution would be supporting long-term confidence in the British economy with a more permanent fix.”