London Daily

Focus on the big picture.
Friday, Aug 07, 2026

A brief history of windfall taxes: who used them and why

A brief history of windfall taxes: who used them and why

Windfall taxes have been used by Tory governments at least three times in the last 40 years

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:

The 1980s


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.

The 1990s


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 was calculated as 23% of the difference between ‘company value’, calculated by reference to profits over a period of up to four years after privatisation, and the value placed on the company at the time of flotation.” The thinktank said the tax raised £5.2bn, equivalent to around £13bn in today’s terms.

The windfall tax that never happened


In the aftermath of the 2008 global financial crash, oil prices soared. A YouGov poll commissioned by the centre-left pressure group Compass and the Observer showed that 67% of Britons “strongly agreed” or “agreed” that a one-off tax should be levied on oil and gas companies. Gas prices had doubled since 2000, and electricity prices were up by nearly two-thirds. Energy companies’ profits had climbed nearly sixfold in three years.

A large group of Labour MPs backed the poll, but Brown, now prime minister, rejected the idea, arguing that a tax on profits could damage economic competitiveness at a fragile time with a recession looming, while costs might be passed on to consumers.

Osborne’s oil tax


In 2011 Osborne increased the surcharge on North Sea oil and gas producers from 20% to 32% above the normal rate of corporation tax, arguing that “when oil prices are high … UK oil and gas production is more profitable … so it is fair that companies should contribute more”.

It’s a bit of a cheat to include Osborne in the list because his botched scheme wasn’t designed as a one-off windfall tax, but a multi-year increase that would last as long as prices remained high. Instead the 12 percentage points increase, which raised £2bn in its first year, was supposed to underwrite a 1p reduction in the duty on petrol and diesel and scrap a further 5p increase due under plans agreed by the previous Labour government.

It became a windfall tax after the oil and gas industry responded by cutting investment, spooking the Treasury and forcing a U-turn. A year later Osborne, who had promised the industry a stable tax regime and failed to give any advanced warning, offered to shield £500m of investment from tax. Later, and as the oil price plummeted, he cut the headline rate of tax back to previous levels.

Newsletter

Related Articles

0:00
0:00
Close
Weight-Loss Drug Boom Tests the Limits of Prescription Advertising Rules
Trump Keeps Hegseth at Pentagon While Leaving Door Open for DeSantis
UK Clears Paramount’s Warner Bros. Discovery Deal, but US Trial Looms
UK Prosecutors Add 38 Charges Against Andrew and Tristan Tate
Taiwan’s President Joins Wartime Command Drill as China Pressure Grows
Saudi Arabia, Turkey and Pakistan Sign Mutual-Defence Pact
Trump-Era Policy Shifts Test the Boundaries of U.S. Institutions
UK Drought Cuts Harvests and Raises Food-Security Fears
Ukraine Tells Senate Republicans Its Drone War Offers a Blueprint for America
HMRC’s 2029 Tax Shift Could Overlap Old and New Self-Assessment Bills
Thetford Disorder Prompts Expanded Police Powers Amid Asylum-Housing Protests
Cambridge Faces Calls for Independent Review of Jason Arday Appointment
Scotland’s ‘Cock of the North’ Woodland Is Being Felled After Wind Damage
Reform UK and Greens Unite Against Vast Solar Plans for Kent Marshland
New Zealand Draws Wealthy Americans With Revamped Investor Visa
Senate Panel Votes to Hold Anthony Fauci in Contempt After Fifth Amendment Testimony
Cambridge Professor Jason Arday Resigns as University Opens Inquiry Into His Credentials
Manchester Power Failure Disrupts Trains Across North West Into Friday
UK Fashion and Tourism Sectors Prepare for Strong Summer and Autumn Activity
London Residents Seek Appeal Against Approval for Chinese Super-Embassy Development
UK Environment Officials Issue Biosecurity Alert Over Rising Bluetongue Cases in Livestock
UK Charity Regulator Opens Investigations Into Donations Linked to Israeli Settlements
Gatwick Expansion and Chinese Embassy Plans Highlight Growing UK Infrastructure Disputes
UK Agriculture Authorities Warn of Rising Bluetongue Virus Cases Among Sheep Farms
UK Watchdog Finds Electronic Monitoring Failures Leaving Some Offenders Without Timely Alerts
Metropolitan Police Investigate Covent Garden Knife Attack That Injured Four Men
UK Government Confirms Severe Terror Threat Level as Prevent Programme Expands
Diageo Plans Guinness Expansion While Cutting Jobs Through Global Restructuring Programme
Bank of England Keeps UK Borrowing Costs Stable While Markets Await Future Rate Cuts
Gatwick Airport Wins Approval for Second Runway Expansion After Legal Challenges Fail
Apple Challenges UK Government Over Demand for Access to Encrypted iCloud Data
London Approves First Autonomous Taxi Licences for Wayve and Uber Passenger Trials
UK Artificial Intelligence Safety Institute Finds Advanced AI Models Showing Deceptive Behaviour in Security Tests
UK Small Boat Channel Crossings Fall Forty-Three Percent as Government Highlights France Cooperation
UK Government Plans Procurement Reforms to Boost British Jobs and Domestic Steel Supply Chains
Bank of England Holds Interest Rates at Three Point Seven Percent as Inflation Stays Above Target
EY Raises UK 2026 Growth Forecast to Zero Point Nine Percent as Energy Risks Remain a Concern
UK Artificial Intelligence Regulation and Public Infrastructure Investment Remain Key Policy Focus Areas
Kemi Badenoch Faces Criticism Over Appointment of Former Neo-Nazi Linked Figure to Advisory Role
AG Barr Reports £10 Million Sales Loss After Supply Chain and Planning Failures
UK Government Fast-Tracks Specialist Care Pathways for Motor Neurone Disease Patients
UK Government Connects More Than 60,000 Rural Homes and Businesses to Gigabit Broadband
Next Raises Full-Year Profit Forecast After Strong Summer Sales
Metropolitan Police Arrest Woman After Four Men Stabbed in Central London’s Covent Garden Area
UK Procurement Reform and Infrastructure Spending Signal New Focus on Regional Economic Growth
UK Government Expands Global Talent Visa Access for International Researchers and Innovators
NHS Launches £343 Million Expansion of Community Mental Health Centres Across England
UK Treasury Explores Higher Borrowing Capacity for Infrastructure and Housing Investment
UK Cabinet Office Reforms Procurement Rules to Direct £90 Billion of Public Spending Toward Jobs and Skills
UK Government Considers Public Inquiry Into Jeffrey Epstein’s Activities and Possible Institutional Failures
×