London Daily

Focus on the big picture.
Friday, Jun 20, 2025

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
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Iranian Military Officers Reportedly Seek Contact with Reza Pahlavi, Signal Intent to Defect
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Vietnam Emerges as Luxury Yacht Destination for Ultra‑Rich
Plans to Sell Dutch Embassy in Bangkok Face Local Opposition
China's Iranian Oil Imports Face Disruption Amid Escalating Middle East Tensions
Trump's $5 Million 'Trump Card' Visa Program Draws Nearly 70,000 Applicants
DGCA Finds No Major Safety Concerns in Air India's Boeing 787 Fleet
Airlines Reroute Flights Amid Expanding Middle East Conflict Zones
Elon Musk's xAI Seeks $9.3 Billion in Funding Amid AI Expansion
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Israeli Airstrike Targets Iranian State TV in Central Tehran
President Trump is leaving the G7 summit early and has ordered the National Security Council to the Situation Room
Taiwan Imposes Export Ban on Chips to Huawei and SMIC
Israel has just announced plans to strike Tehran again, and in response, Trump has urged people to evacuate
Netanyahu Signals Potential Regime Change in Iran
Juncker Criticizes EU Inaction on Trump Tariffs
EU Proposes Ban on New Russian Gas Contracts
Analysts Warn Iran May Resort to Unconventional Warfare
Iranian Regime Faces Existential Threat Amid Conflict
Energy Infrastructure Becomes War Zone in Middle East
UK Home Secretary Apologizes Over Child Grooming Failures
Trump Organization Launches 5G Mobile Network and Golden Handset
Towcester Hosts 2025 English Greyhound Derby Amid Industry Scrutiny
Gary Oldman and David Beckham Knighted in King's Birthday Honours
Over 30,000 Lightning Strikes Recorded Across UK During Overnight Storms
Princess of Wales Returns to Public Duties at Trooping the Colour
Red Arrows Use Sustainable Fuel in Historic Trooping the Colour Flypast
Former Welsh First Minister Addresses Unionist Concerns Over Irish Language
Iran Signals Openness to Nuclear Negotiations Amid Ongoing Regional Tensions
France Bars Israeli Arms Companies from Paris Defense Expo
King Charles Leads Tribute to Air India Crash Victims at Trooping the Colour
Jack Pitchford Embarks on 200-Mile Walk to Support Stem Cell Charity
Surrey Hikers Take on Challenge of Climbing 11 Peaks in a Single Day
UK Deploys RAF Jets to Middle East Amid Israel-Iran Tensions
Two Skydivers Die in 'Tragic Accident' at Devon Airfield
Sainsbury's and Morrisons Accused of Displaying Prohibited Tobacco Ads
UK Launches National Inquiry into Grooming Gangs
Families Seek Closure After Air India Crash
Gold Emerges as Global Safe Haven Amid Uncertainty
Trump Reports $57 Million Earnings from Crypto Venture
Trump's Military Parade Sparks Concerns Over Authoritarianism
Nationwide 'No Kings' Protests Challenge Trump's Leadership
UK Deploys Jets to Middle East Amid Rising Tensions
Trump's Anti-War Stance Tested Amid Israel-Iran Conflict
Germany Holds First Veterans Celebration Since WWII
U.S. Health Secretary Dismisses CDC Vaccine Advisory Committee
Minnesota Lawmaker Melissa Hortman and Husband Killed in Targeted Attack; Senator John Hoffman and Wife Injured
Exiled Iranian Prince Reza Pahlavi Urges Overthrow of Khamenei Regime
×