Windfall taxes have been applied on several occasions since 1997 by United Kingdom governments, in response to company profits that were considered to be excessive or unexpected.
1997 Taxes on privatised utilities
The
Labour
Labour or labor may refer to:
* Childbirth, the delivery of a baby
* Labour (human activity), or work
** Manual labour, physical work
** Wage labour, a socioeconomic relationship between a worker and an employer
** Organized labour and the labour ...
government of
Tony Blair
Sir Anthony Charles Lynton Blair (born 6 May 1953) is a British former politician who served as Prime Minister of the United Kingdom from 1997 to 2007 and Leader of the Labour Party from 1994 to 2007. He previously served as Leader of th ...
in 1997 introduced a windfall tax on what were described as "the excess
profits of the privatised
utilities
A public utility company (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and ...
". It followed from their manifesto commitment made during the
1997 general election campaign to impose a "windfall levy" on the privatised utilities. The tax came after 18 years of
Conservative
Conservatism is a cultural, social, and political philosophy that seeks to promote and to preserve traditional institutions, practices, and values. The central tenets of conservatism may vary in relation to the culture and civilization in ...
government, which had seen the privatisation of many state-owned assets, at prices which many considered too low. It aimed to "put right the bad deal which customers and taxpayers got from the privatisation of the utilities". The tax produced an estimated one-off income to the government of £5 billion, which was used to fund the
New Deal, a welfare-to-work program that sought to tackle long-term unemployment, as well as providing capital investment for schools and the
University for Industry (Learndirect).
The tax was calculated by means of a nine times
P/E ratio, whereby the average post-tax profit in the four years after privatization was multiplied by nine to give the value for the purposes of the tax. The difference between this value and the total market capitalisation based on the company's flotation price was subject to a 23% "windfall tax". The tax was charged to the company and was payable in two instalments on 1 December 1997 and 1 December 1998.
The companies affected were those privatized by the
Telecommunications Act 1984
The Telecommunications Act 1984 (c 12) is an Act of the Parliament of the United Kingdom. The rules for the industry are now contained in the Communications Act 2003.
Provisions
The provisions of the act included the following:
* Privatising ...
, the
Airports Act 1986
The Airports Act 1986 (c. 31) is an Act of the Parliament of the United Kingdom. The act reformed civil aviation in Great Britain and privatised the British Airports Authority from a public department into BAA as a private company. It also grante ...
, the
Gas Act 1986
The Gas Act 1986 (Chapter 44) created the framework for privatisation of the gas supply industry in Great Britain. This legislation would be replacing the British Gas Corporation (government or state ownership) with British Gas plc (private own ...
, the
Water Act 1989
The Water Act 1989 (1989 c.15) is an Act of the Parliament of the United Kingdom that reorganised the bodies responsible for all aspects of water within England and Wales. Whereas previous legislation, particularly the Water Act 1973, had focuse ...
, the
Electricity Act 1989
The Electricity Act 1989 (c. 29) provided for the privatisation of the electricity supply industry in Great Britain, by replacing the Central Electricity Generating Board in England and Wales and by restructuring the South of Scotland Electricit ...
(and the Electricity (Northern Ireland) Order 1992) and the
Railways Act 1993
The Railways Act 1993c 43 was introduced by John Major's Conservative government and passed on 5 November 1993. It provided for the restructuring of the British Railways Board (BRB), the public corporation that owned and operated the national ra ...
. The firms affected were
BAA,
British Energy
British Energy was the UK's largest electricity generation company by volume, before being taken over by Électricité de France (EDF) in 2009. British Energy operated eight former UK state-owned nuclear power stations and one coal-fired power ...
,
British Gas
British Gas (trading as Scottish Gas in Scotland) is an energy and home services provider in the United Kingdom. It is the trading name of British Gas Services Limited and British Gas New Heating Limited, both subsidiaries of Centrica. Servi ...
(later BG plc and Centrica),
British Telecom,
National Power
National power is defined as the sum of all resources available to a nation in the pursuit of national objectives. Assessing the national power of political entities was already a matter of relevance during the classical antiquity, the middle ages ...
,
Northern Ireland Electricity
Northern Ireland Electricity Networks Limited (NIE Networks) is the electricity asset owner of the transmission and distribution infrastructure in Northern Ireland, established in 1993 when the business was privatised. NIE Networks does not gene ...
,
Powergen,
Scottish Hydro
Scottish Hydro plc was a public electricity supplier formed on 1 August 1989 after a change of name from North of Scotland Electricity plc on that date. It was listed on the London Stock Exchange and was once a constituent of the FTSE 100 Index ...
,
Scottish Power
Scottish Power is a vertically integrated energy company based in Glasgow, Scotland. It is a subsidiary of Spanish utility firm Iberdrola.
ScottishPower is the distribution network operator for Central and Southern Scotland, Merseyside, Nor ...
,
Railtrack
Railtrack was a group of companies that owned the track, signalling, tunnels, bridges, level crossings and all but a handful of the stations of the British railway system from 1994 until 2002. It was created as part of the privatisation of ...
, the regional electricity companies and the privatized water and sewerage companies (including such companies now forming part of Hyder,
United Utilities
United Utilities Group plc (UU), the United Kingdom's largest listed water company, was founded in 1995 as a result of the merger of North West Water and NORWEB. The group manages the regulated water and waste water network in North West Engla ...
and Scottish Power).
Other proposals
From 1997 to 2022, no further windfall taxes were levied in the UK. However, calls were made for new ones. The ''
Financial Times
The ''Financial Times'' (''FT'') is a British daily newspaper printed in broadsheet and published digitally that focuses on business and economic current affairs. Based in London, England, the paper is owned by a Japanese holding company, Ni ...
'' reported in January 2008 that the government was considering ways of maximising returns to the treasury from the sale of the troubled
Northern Rock
Northern Rock, formerly the Northern Rock Building Society, was a British bank. Based at Regent Centre in Newcastle upon Tyne, United Kingdom, Northern Rock was originally a building society. It demutualised and became Northern Rock bank i ...
bank, which could include a windfall tax or the government taking an equity stake. In the event, the bank was not sold on to private investors, but instead came under UK government ownership. It was returned to the private sector in the 2010s.
Windfall tax on energy companies
Calls were made for a windfall tax on energy companies during the summer of 2008 in the wake of energy price rises and the environmental record of the oil and gas industry. 120 Labour
MPs supported the call, as well as columnist for ''
The Guardian
''The Guardian'' is a British daily newspaper. It was founded in 1821 as ''The Manchester Guardian'', and changed its name in 1959. Along with its sister papers ''The Observer'' and ''The Guardian Weekly'', ''The Guardian'' is part of the Gu ...
'' newspaper
Polly Toynbee and the left-wing pressure group
Compass
A compass is a device that shows the cardinal directions used for navigation and geographic orientation. It commonly consists of a magnetized needle or other element, such as a compass card or compass rose, which can pivot to align itself wit ...
. There were conflicting reports in the media over whether the government was looking into implementing the tax, with suggestions that government ministers were both interested in and opposed to the idea. Despite the
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later reporting in early September that such a windfall tax was "still an option", then
confirmed at the Labour Party conference later that month that the idea had been scrapped.
The issue was raised again in 2013, led by former Prime Minister
, who described the recent energy price rises of more than 10% as "unacceptable", and called for a one-off emergency tax.
A windfall tax on oil and gas companies featured in the Labour manifesto in the
. Labour said the proposed tax would raise £11bn and aid in the transition to a
.
Labour announced plans to have an annual windfall tax to give back to the least wealthy.
's government announced a windfall tax for energy companies, to help fund a package to relieve the
.