Business Secretary Grant Shapps hints at autumn budget windfall tax expansion on energy firms due to ‘unexpected profits’

Published

2 years ago

November 7, 2022

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Business Secretary Grant Shapps has hinted that the government may extend the windfall tax on oil and gas companies in this month’s autumn budget as it tries to stabilise the UK’s public finances.

Speaking to Sky News with just 10 days to go before the government’s fiscal plans are unveiled, Mr Shapps said: “I mean, it is the case that because fuel prices have been so high, there have been unexpected profits, of course.

“But I think it’s important that we do carry on investing in making sure not on fossil fuels, but on the renewable energy as well, that we’ve we’ve got the capacity, we’ve got the ability to get that market moving as well.”

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He added that the general public will “have to wait until the 17th” to know exactly which measures the government is going to pursue to tackle what the Resolution Foundation thinktank has said is a £40bn financial black hole.

Last week, an initial report in The Times suggested that Prime Minister Rishi Sunak and Chancellor Jeremy Hunt were planning to extend windfall taxes on oil and gas companies to raise an estimated £40bn over five years.

Mr Sunak and Mr Hunt want to maximise revenues from the windfall tax by increasing the rate from 25% to 30%, extending the policy until 2028, and expanding it to cover electricity generators – according to the paper.

With BP unveiling profits that doubled to more than £7.1bn in the three months to September, pressure is continuing to mount for an enhanced windfall tax on oil and gas giants to help fill the Treasury coffers.

COP26 president Alok Sharma, who was demoted from the cabinet by Mr Sunak, has backed the move, saying: “We need to raise more money from a windfall tax on oil and gas companies and actively encourage them to invest in renewables.”

The Resolution Foundation said in a report last week that tax raises are “likely” to come soon as the government faces an “unpalatable menu” to find ways to re-balance the nation’s finances after former chancellor Kwasi Kwarteng’s ill-fated economic plans.

A combination of tax rises and spending cuts is likely to find the £40bn needed, it said.

Mr Sunak and Mr Hunt are currently figuring out how to tackle the abysmal economic forecast ahead of the autumn statement on 17 November, which was pushed back soon after Mr Sunak reappointed Mr Hunt.

The Resolution Foundation’s report added that a recession next year could be predicted by the government’s independent forecaster, the Office for Budget Responsibility.

Last week, the Bank of England raised its official interest rates by 0.75 percentage points to 3% and said the UK was already in recession.

It was the single biggest increase in more than three decades.

While GDP forecasts could be cut by up to 4% by the end of 2024.

The autumn statement this month will likely encompass “rough” tax rises, Sky News has been told by a source in the Treasury.

The tax rises are likely to be across the board, although Mr Sunak and Mr Hunt are said to have agreed those with the “broadest shoulders” should bear the greatest burden, it is understood.

Few concrete details have emerged but, according to The Times, public sector workers could face deep real-terms cuts to wages, with the Treasury reportedly looking at an increase of 2% across the board for 2023-24, at a time when inflation is expected to be well above that threshold.

The Resolution Foundation has said £9bn could be saved by the government choosing not to raise benefits and pensions in line with rising prices next year, but any such move would have a “huge” impact on those already struggling to make ends meet.

Another option would be to re-instate the health and social care levy to raise £15bn by 2026-2027, while around £2bn could be raised by extending the “stealth” freezes in income tax threshold by a further year to 2026-2027.

Business

Apple sued by Which? over iCloud use – with potential payout for 40 million UK customers

Published

59 mins ago

November 14, 2024

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Apple sued by Which? over iCloud use - with potential payout for 40 million UK customers

Consumer rights group Which? is suing Apple for £3bn over the way it deploys the iCloud.

If the lawsuit succeeds, around 40 million Apple customers in the UK could be entitled to a payout.

The lawsuit claims Apple, which controls iOS operating systems, has breached UK competition law by giving its iCloud storage preferential treatment, effectively “trapping” customers with Apple devices into using it.

It also claims the company overcharged those customers by stifling competition.

The rights group alleges Apple encouraged users to sign up to iCloud for storage of photos, videos and other data while simultaneously making it difficult to use alternative providers.

Which? says Apple doesn’t allow customers to store or back-up all of their phone’s data with a third-party provider, arguing this violates competition law.

The consumer rights group says once iOS users have signed up to iCloud, they then have to pay for the service once their photos, notes, messages and other data go over the free 5GB limit.

“By bringing this claim, Which? is showing big corporations like Apple that they cannot rip off UK consumers without facing repercussions,” said Which?’s chief executive Anabel Hoult.

“Taking this legal action means we can help consumers to get the redress that they are owed, deter similar behaviour in the future and create a better, more competitive market.”

Apple ‘rejects’ claims and will defend itself

Apple “rejects” the idea its customers are tied to using iCloud and told Sky News it would “vigorously” defend itself.

“Apple believes in providing our customers with choices,” a spokesperson said.

“Our users are not required to use iCloud, and many rely on a wide range of third-party alternatives for data storage. In addition, we work hard to make data transfer as easy as possible – whether it’s to iCloud or another service.

“We reject any suggestion that our iCloud practices are anti-competitive and will vigorously defend against any legal claim otherwise.”

It also said nearly half of its customers don’t use iCloud and its pricing is inline with other cloud storage providers.

How much could UK Apple customers receive if lawsuit succeeds?

The lawsuit will represent all UK Apple customers that have used iCloud services since 1 October 2015 – any that don’t want to be included will need to opt out.

However, if consumers live abroad but are otherwise eligible – for example because they lived in UK and used the iCloud but then moved away – they can also opt in.

The consumer rights group estimates that individual consumers could be owed an average of £70, depending on how long they have been paying for the services during that period.

Apple is facing a similar lawsuit in the US, where the US Department of Justice is accusing the company of locking down its iPhone ecosystem to build a monopoly.

Apple said the lawsuit is “wrong on the facts and the law” and that it will vigorously defend against it.

Big tech’s battles

This is the latest in a line of challenges big tech companies like Apple, Google and Samsung have faced around anti-competitive practices.

Most notably, a landmark case in the US earlier this year saw a judge rule that Google holds an illegal monopoly over the internet search market.

The company is now facing a second antitrust lawsuit, and may be forced to break up parts of its business.

And in December last year, a judge declared Google’s Android app store a monopoly in a case brought by a private gaming company.

“Now that five companies control the whole of the internet economy, there’s a real need for people to fight back and to really put pressure on the government,” William Fitzgerald, from tech campaigning organisation The Worker Agency, told Sky News.

“That’s why we have governments; to hold corporations accountable, to actually enforce laws.”

Business

Homebase deal leaves 2,000 jobs at risk

Published

13 hours ago

November 13, 2024

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The jobs of more than half of the workforce at the DIY chain Homebase are at risk after the retailer’s owners called in administrators following a failed attempt at a sale.

Sky News reported earlier on Wednesday that around 1,500 people were set to keep their roles as 75 of the 130 stores were set to be snapped up by the saviour of Wilko in a so-called pre-pack deal.

The Range, also a general merchandise specialist, was confirmed as the buyer later in the day.

Teneo, which is handling the process, is understood to have been working to find a buyer for as many of the chain’s sites as possible.

Teneo said in a statement on Wednesday afternoon that up to 70 stores were confirmed to be included in the deal – saving up to 1,600 jobs out of 3,600.

It leaves 2,000 jobs at risk.

Forty-nine other stores will continue to trade while alternative offers are explored.

Sources told Sky’s City editor Mark Kleinman that there had been many expressions of interest in the remaining stores, despite the gloom being felt across the retail sector over the higher tax take demanded in the budget.

The sector has warned of higher inflation and job losses arising from the measures, which include increased employer national insurance contributions and minimum wage levels.

The pre-pack deal – which typically allows a buyer to cherry-pick the assets it wants – brings to an end a six-year ownership of Homebase by Hilco, the retail restructuring specialist.

Teneo had initially been attempting to find a buyer for the whole Homebase business.

The partial sale comprises all those stores in the Republic of Ireland and the Homebase brand and its e-commerce business.

The Range is part of CDS Superstores, which is controlled by the businessman Chris Dawson – nicknamed “the Del Boy billionaire” because of the distinctive number plate on his Rolls-Royce Wraith.

Last year, it paid £7m to buy the brand and intellectual property assets of Wilko, which had collapsed into administration.

Since then, Mr Dawson has opened a string of new Wilko outlets.

Business

P&O spent £47m sacking and replacing 786 mainly British seafarers in 2022

Published

19 hours ago

November 13, 2024

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P&O spent £47m sacking and replacing 786 mainly British seafarers in 2022

P&O Ferries spent more than £47m summarily sacking hundreds of seafarers in 2022, helping it cut losses by more than £125m and putting it on a path to profitability, according to accounts due to be published in the coming days.

The dismissal of 786 mainly British seafarers, and their replacement with largely non-European agency staff earning as little as £4.87 an hour, was hugely controversial, drawing criticism from across the political spectrum and threats of a consumer boycott.

The controversy was rekindled last month when Sky News revealed that DP World, P&O‘s Dubai-based parent, considered withdrawing a £1bn investment at its London Gateway port following criticism of P&O by the Transport Secretary Louise Haigh.

P&O has always maintained the restructuring was necessary to allow it to compete with its rivals on cross-Channel routes, and prevent a total collapse of the company with the loss of more than 2,000 jobs.

In financial statements for P&O Holdings, filed 11 months late and seen by Sky News, the company says the restructuring cost £47.4m including legal fees and consultants, allowing it to cut the overall wage and salary bill by £21.3m.

In a note accompanying the accounts submitted to Companies House, P&O’s directors describe the restructuring as part of a “transformational journey” that will help it return to recording a profit before tax this year.

“The business has been on a transformational journey as it has recovered from the challenges of the global pandemic, Brexit and the impact of disruption caused by the change in the crewing model,” the directors say.

“The group believes that the transformational actions that commenced in 2022 and continue through into 2024 will equip the business to grow profitably when demand rises in the coming years.”

Brexit and COVID financial distress

The accounts reveal the financial distress in which P&O found itself in 2022.

Having recorded losses of £375m the previous year as it struggled to recover from the pandemic-era decline in passenger numbers and post-Brexit complications, it was in breach of its covenants to external lenders underwriting the construction of new hybrid cross-Channel ferries.

Despite the restructuring costs, revenue increased by £83.3m to £918m in the financial year, but the company still recorded a loss of £249m and was reliant on loans totalling £365m from parent company DP World to remain a going concern.

An additional £70m was made available this year, with 4.5% interest rolled up and not requiring any repayment until 2028 at the earliest.

The financial statements also reveal that P&O was forced to sell one of the new cross-Channel ferries to a French subsidiary to pay off an external financing loan of £76.9m, and then lease the vessel back from its ultimate owner.

In a statement, P&O Ferries said: “Our 2022 financial accounts show the challenges faced by the business at that time, and why the business needed to transform into a competitive operator with a sustainable long-term future.

“P&O Ferries has taken steps to adjust to new market conditions, matching our capacity to demand, and adopting a more flexible operating model that enables us to better serve our customers.”