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Impatient Tory MPs Fear They'll Be Stitched Up By A U-Turn On Windfall Tax

Impatient Tory MPs Fear They'll Be Stitched Up By A U-Turn On Windfall Tax
5 min read

There were uneasy looks on the faces of Conservative MPs as they made their way to the House of Commons to vote on a Labour amendment to the Queen's Speech on Tuesday night.

The amendment called for the government to hit major oil and gas companies with a windfall tax in order to help fund further support for households amid the ongoing cost of living crisis.

It was defeated by 310 votes to 248, with every Conservative MP voting against it.

But many feel that resistance to such a tax is unsustainable, and view a change of tack from government as inevitable. One former Cabinet minister wryly remarked en route to the chamber that in just a few weeks' time they would be instructed by government whips to vote the opposite way: for a windfall tax.

Their downbeat view summed up a widespread feeling this week in the parliamentary Tory party that they’re being set up for yet another high profile U-turn by Downing Street. 

“The writing is on the wall," complained one frustrated backbencher elected in 2019.

"I really don’t know why we are doing this fucking dance."

The MP said that in emails to their constituents they had already started to indicate that a change in policy was on the horizon when it comes to a windfall tax, amid growing pressure on Prime Minister Boris Johnson and Chancellor Rishi Sunak to do more to help struggling households.

Government figures and Tory MPs agree that the measures set out by Sunak in February to help people with rising energy bills are no longer sufficient and will need to be bolstered significantly in the coming weeks, with the cost of living crisis showing no signs of abating any time soon.

The current expectation among Conservative MPs is that the chancellor will bring forward a fresh package of measures before Parliament breaks up for its summer recess in late July. 

“We’re all braced for some sort of cost-of-living intervention," said a senior government source.

But there is currently no agreement among ministers over what form that extra support should take, including whether to embrace a windfall tax, believed to be popular among voters, having spent weeks trashing the idea.

Speaking at the Confederation of British Industry (CBI) on Wednesday, Sunak said the government's response to the cost of living crisis would "evolve" and that ministers "stand ready" to take further action. The chancellor did not specify how the policy could evolve, however.

A Downing Street source said "little had changed" with the government’s position on cost of living measures heading into the weekend. Sunak and Johnson are expected to meet next week to have further discussions about what should be done.

There is far from consensus within the Conservative party on what the extra support should be.

While some Tory MPs say they would be perfectly comfortable with applying a one-off tax on the profits of energy giants, others are firmly against it. Some want cuts to VAT and income tax, while others want the Universal Credit uplift, brought in during the pandemic, to be restored.

The remarks of ministers this week have not done much to allay confusion over the government's position on a windfall tax. Kit Malthouse, the policing minister said on Thursday that the government was “intrinsically opposed" to it, but that current circumstances may warrant it.

The prime minister's spokesperson on Friday said that while Johnson and Sunak are "not attracted to the idea of a windfall tax", the chancellor "has been clear that no option is off the table".

Labour leader Keir Starmer accused Johnson of performing a "hokey-cokey" in Wednesday's Prime Minister's Questions. "One minute they're ruling it in, next they're ruling it out," he said.

One former secretary of state complained that the government lacked long-term thinking on the most important issue facing the country. They said the vacuum was being filled by briefing wars between Downing Street and the Treasury, and that Sunak seemed "deflated" and short of confidence after the bruising few weeks which saw him receive intense scrutiny for his own tax affairs. Sunak, who is the first frontline politician to appear on the infamous Sunday Times Rich List has also faced accusations of being out-of-touch with the troubles of members of the public. 

The Times reported this week that while the Treasury wanted to keep the door open to a windfall tax, arguing it would send a message that the government was on the side of the public, Downing Street figures were pushing back because it was "ideologically un-Conservative". 

PoliticsHome understands that the Department for Business, Energy and Industrial Strategy, led by Kwasi Kwarteng, sides with the latter view. BEIS ministers have been telling Conservative MPs that imposing a windfall tax on big energy firms would deter investment in the UK.

However, there is a belief among Conservative MPs that the scale of the cost of living crisis facing households will leave ministers with no choice but to take radical action. Inflation hit a 40-year high of 9% this week, and energy prices are expected to rise as we head into colder months of later this year.

A moderate Tory who is in favour of a windfall tax said those Conservative MPs who complain about the proposal being "un-Conservative" miss the point that the Conservative party has taken on different shapes throughout its history as it has adapted to changing circumstances.

"All monetary policy of the last 40 years was in peacetime, but now we’re in wartime and things have fundamentally changed," they told PoliticsHome.

"The core principle of the Conservative party, which is pragmatism and responding to things as they occur, means sometimes doing things you wouldn’t immediately associate with the Tory party.

"When people say they want a Tory government, I say: ’Well, which Tory government?"

 

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