The history of windfall taxes: who used them and why
Windfall taxes are often cited by Conservative MPs as “unTory” and the preserve of the political left desperate to recoup cash from “fat cats” making excessive profits.
Clement Attlee’s postwar Labour government imposed several surcharges on companies and estates, including a 100% excess profits tax (EPT), which lasted a year.
Yet windfall taxes have been introduced by Tory governments on at least three occasions over the last 40 years. If anything, Rishi Sunak’s surcharge on the profits of energy companies has a strong pedigree among leaders who defer to the free market, including Margaret Thatcher and the former chancellor George Osborne. Here is a brief history of Britain’s windfall taxes:
In 1981 Thatcher’s then chancellor, Geoffrey Howe, accused high street banks of escaping the recession. He introduced a special budget levy that creamed off 2.5% of the banks’ non-interest-bearing current account deposits to generate about £400m in extra revenue – equivalent to around a fifth of their profits in those 12 months.
The following year, Treasury officials came to the same conclusion when oil prices soared, and imposed a special tax, raising £2.4bn. North Sea oil firms argued at the time that extra taxes would limit investment, but the industry flourished.
Gordon Brown as chancellor vowed to stick by Tory tax commitments, forcing him to adopt a windfall tax to generate extra revenue. He took aim at utilities that were privatised under the Tories at giveaway prices. They were widely considered to be making excessive profits from their monopolies of sectors previously under state control.
Around £5bn was paid by firms including BAA, British Gas, British Telecom and Powergen.
As the Institute for Government explained: “The tax owed
Read more on theguardian.com
