Windfall tax is a big risk and Rishi Sunak’s policies may lead to recession, warns former minister
FORMER Tory leadership candidate Sir John Redwood has warned that the Government’s windfall tax on energy firms is risky and its economic policies may be leading us towards a recession.
He said he was opposed to a windfall tax on energy firms as it would affect future investment.
“Why don’t I want a windfall tax on the energy companies? Well, because it’s a highly risky business,” Redwood said in an interview with GB News.
“Two years ago, they were all losing billions of pounds and none of us thought then the taxpayers should pay some of their bills,” he stressed.
“So why do you take some money away from them when they eventually have a year when they make some money?”
Redwood said a windfall tax would have consequences: “It’s not good politics in the long term.
“It’s bad politics because if Britain gets a reputation of being the place where you come and invest, you lose money and you keep the loss and you come and invest you make money and the taxman takes a big extra chunk of it.”
“They’re not going to come, why should they?”
Tax policy off the rails
Redwood further said the Government’s tax policy has gone off the rails.
“I think the settings have gone wrong. And so we have both an inflation that is too high and we have the threat of a recession.”
“I’m very critical of the Treasury suggesting that they carry on with the tax raises they’ve already put in place, and now suggesting they need another tax on energy companies on top.
“We are the only advanced world country thinking about a big tax increase at the same time that people’s incomes are hit sideways by the huge surge in energy and food prices.”
John Redwood
Sir John said he feared the Government was making the same mistakes of the past.
“I remember being very against the [European] Exchange Rate Mechanism which led to the predictable boom bust and crash we had, then I with all my colleagues was against the excesses in 2005 to 2008 in the run up to the banking crash because we’re all saying too much credit you’re overextending it all, then they made a worse mistake which was they took all the money away too quickly,” he said.
“And they then had a recession on the back of a runaway credit explosion. They were trying to control this and we had another massive boom and bust.
“I’m saying to this government, don’t do a boom and bust again, don’t let the Treasury move us from what has been pretty good growth recovery just because there’s a bit of inflation around to go deep into recession.
“I don’t think you need a deep recession to correct this inflation.”
He said imposing big tax rises on companies hits productivity and is damaging to the economy.
“That is doubly damaging because not only does it take more money out of the productive sector, but of course, it makes us far less competitive.
“And so in a world next year, when there’s probably going to be less investment and less confidence around, the UK is going to go some way down the rankings when people are thinking where’s a good place to put your money,” Redwood concluded.