London Daily

Focus on the big picture.
Friday, Apr 10, 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
UK Foreign Secretary Highlights Impact of Intensified Strikes in Lebanon
UK Urges Inclusion of Lebanon in US-Iran Ceasefire Framework
UK Stocks Ease as Ceasefire Doubts in Middle East Weigh on Investor Confidence
UK Reassesses Cloud Strategy Amid Criticism Over Limited Support Measures
UK Calls for Full and Toll-Free Access Through Strait of Hormuz Amid Rising Tensions
Starmer Signals Strategic Shift for Britain Amid Escalating Iran-Linked Tensions
UK Issues Firm Warning to Russia Over Covert Underwater Military Activity
OpenAI Halts Stargate UK Project, Casting Uncertainty Over Britain’s AI Expansion Plans
Starmer Voices Frustration Over Global Pressures Driving UK Energy Costs Higher
UK Deploys Military Assets to Protect Undersea Cables From Suspected Russian Threat
Canada Aligns With US, UK and Australia as Europe Prepares Major Digital Border Overhaul
Meghan Markle’s Planned Australia Appearance Sparks Fresh Speculation
Starmer Warns Sustained Effort Needed to Ensure US–Iran Ceasefire Holds
UK to Partner with Shipping Industry to Rebuild Confidence in Strait of Hormuz, Cooper Says
UK Interest Rate Expectations Ease Following US–Iran Ceasefire Agreement
Starmer Signals Major Effort Needed to Fully Reopen Strait of Hormuz During Gulf Visit
UK Fuel Prices Face Ongoing Volatility Amid Global Pressures and Domestic Factors
Kanye West’s Planned Italy Festival Appearance Draws Debate After UK Entry Ban
Smuggling Routes Shift Toward Belgium as Migrant Crossings to UK Evolve
Ceasefire Offers Potential Relief for UK Fuel and Food Prices Amid Ongoing Uncertainty
Iran Conflict Raises Questions Over UK’s Global Influence and Military Preparedness
Senator McConnell Visits Kentucky to Highlight Federal Investment in Local Projects
Kanye West Barred from Entering UK as Legal Grounds Come into Focus
UK Denies Visa to Kanye West After Sponsors Withdraw from Wireless Festival
Trump-Era Forest Service Restructuring Leads to Closure of UK Lab Focused on Kentucky Woodland Health
Foreign Students in the UK Describe Harsh Living Conditions and Financial Pressures
Reform UK Proposes Visa Restrictions on Nations Pursuing Reparations Claims
Public Reaction Divides Over UK Decision to Bar Kanye West
Calls Grow for UK to Review US Base Access Following Concerns Over Escalating Rhetoric
UK Indicates It Will Not Permit Use of Its Bases for Potential US Strikes on Iran’s Energy Infrastructure
UK Prime Minister Defends Decision to Bar Kanye West, Questions Festival Booking
UK Accelerates Efforts to Harmonise Medical Technology Rules with United States
Wireless Festival Cancelled After Kanye West Denied Entry to the United Kingdom
Australia’s most decorated living soldier was arrested at Sydney Airport and charged with five counts of war-crime murder for the killing of unarmed Afghan civilians
The CIA’s Secret Technology That Can Find You by Your Heartbeat Successfully Locates Downed Airman
Operation Europe: Trump Deploys Vance to Hungary to Save the EU
King Charles Faces Criticism From Some UK Christians Over Absence of Easter Message
Former UK Defence Secretary Raises Concerns Over Ability to Counter Iran Missile Threat
UK Signals Non-Involvement in Iran Conflict as Trump Reasserts Firm Deterrence Stance
US and UK Strengthen Medical Device Cooperation Following Tariff Removal
Trump Backs Steve Hilton for California Governor, Highlighting Reform Agenda
UK Seeks Closer Ties With Anthropic as AI Policy Divergence Emerges Across Atlantic
Experts Warn of Evolving Extremism After Teens Arrested in UK Ambulance Arson Case
UK Convenes Talks to Safeguard Shipping Through Strait of Hormuz After Conflict Escalation
Trump Highlights Strong Leadership in Critique of UK Stance on Iran
UK Authorities Review Kanye West’s Entry Status Following Festival Backlash
UK Considers Deploying Aircraft Carrier for US Independence Day Celebrations Amid Renewed Transatlantic Focus
United Kingdom Moves to Attract AI Firm Anthropic Amid Tensions with US Defense Officials
RAF Intercepts Iranian Drones in Middle East to Defend Allied Security Interests
Labour Signals Shift on Foie Gras and Fur Restrictions to Advance EU Trade Talks
×