Rees-Mogg tells Sunak no tax ‘economically cost-free’ in warning over windfall tax impact

Rishi Sunak explains why energy rebate is paid per household

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Chancellor Rishi Sunak announced a new set of measures to tackle the soaring cost of living crisis, which includes a £5bn windfall tax on oil and gas firms. Jacob Rees-Mogg reacted to the new package and warned the tax will not be “economically cost-free”. He explained that any form of taxation implies an “economic consequence” and added, “there isn’t a honeypot of free tax that governments can just pop into”.

Mr Rees-Mogg told Sky News: “People need to understand that there is not a tax that you can take that is economically cost-free.

“It doesn’t matter which tax it is.

“It’ll have an economic consequence.

“Whether it’s a pastry tax, to it’s an excess profits tax, there is an economic consequence.

He continued: “There isn’t a honeypot of free tax that governments can just pop into.

“So as long as they raise the tax, knowing that it will have an economic consequence, which the Chancellor does, then it is a matter of choosing between one form of revenue-raising and another.

“There is no non-tax way, ultimately, of spending

“It is either today’s tax, or it’s tomorrow’s tax through borrowing.”

He added: “It’s a very difficult balancing act in an inflationary period because fiscal activity can in and of itself be either inflationary or non-inflationary.

“And therefore, you have to get the balance right to ensure that the deficit doesn’t explode because deficit spending during an inflationary period is deeply inflationary.

“So that is the balance that the Chancellor has been trying to get”.

The Chancellor’s decision to impose a levy on oil and gas giants has faced criticism from the Confederation of British Industry.

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CBI chief economist Rain Newton-Smith claimed that the tax “will be damaging to investment needed for energy security and net-zero ambitions”.

She stressed that the levy “sends the wrong signal to the whole sector at the wrong time” and encouraged the government to work alongside businesses to design a “genuine” plant to increase investment and “get growth going again, particulate in areas like energy efficiency”.

The set of measures announced yesterday in the House of Commons also includes a £400 discount on every UK household’s October energy bills as well as a £650 payment for 8 million lowest-income households.

A one-off £300 to 8 million pensioner households and a £150 payment each to 6 million disabled people are part of the package, Mr Sunak announced.

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