After months of oil bosses bragging about their record profits,  political and public pressure has finally forced Rishi Sunak to impose a Windfall Tax on North Sea fossil fuel profits.

Along with price caps and public ownership, a Windfall Tax is a key part of the solution to the energy and wider living-standards crisis hitting our communities.

But in a modest move that raises just £5 billion, Sunak has chosen to leave billions of undeserved profits in the hands of the very fossil-fuel firms that are driving not only the worst fall in living standards in decades but also the climate crisis.

Fundamentally, people’s energy bills are currently so high because oil and gas companies are making vast excess profits after prices spiked due to the war in Ukraine. The sums are eye-watering: Shell and BP’s global profits have been running at £900 per second.

These excess profits are not the result of some great capitalist innovation or extra corporate investment. They are an undeserved and unexpected windfall. 

So, we have a clear choice: either huge private monopolies in the oil or gas sector gain control of these excess profits; or they can be used for social purposes to help the vast majority of people.

Although pensioners are riding buses to keep warm and millions of parents are skipping meals to feed their kids, Sunak has decided most of those excess profits will stay with the oil giants.

To put into context how low Sunak’s Windfall Tax is, North Sea oil and gas firms are set to make £15 billion in post-tax profits in financial years 2021-22 and 2022-23. That is almost £13 billion more than they would have expected to have made based on their average post-tax profits in the three years before oil and gas prices rose sharply.

Put simply, the Tory Government has taken £5 billion from the oil and gas giants’ super-profits but has let them keep an £8 billion windfall.

Addressing this, I called in Parliament this week for a Windfall Tax of at least £10 billion, while Tax Justice UK has detailed how a Windfall Tax on these excess profits could generate over £12 billion.

The low level of Sunak’s Windfall Tax is part of a much longer pattern of letting the oil industry off the hook. 

Ahead of Sunak’s announcement, Greenpeace highlighted how the UK had one of the lowest tax rates on oil and gas extraction. The global average is a 70 percent tax rate on such profits, while the tax takes of Norway, Mexico and India are still higher. Oil and gas companies operating in Norway pay a corporation tax of 22 percent and a permanent special tax of 56 percent.

This especially low UK tax rate will be temporarily addressed by Sunak’s Windfall Tax which works by increasing the taxes on North Sea oil and gas profits from 40 percent to 65 percent. However, there are deep flaws in his approach.

Not only is it still far too low but it is a temporary tax hike that will be phased out over time. 

Another concern is that the way Sunak’s Windfall Tax is structured actively encourages more fossil fuel extraction by doubling the tax reliefs given to investment on oil and gas. This is part of a long pattern of the government backing oil giants through tax breaks and subsidies that even saw Shell and BP pay zero tax on North Sea gas and oil over one three year period. 

At a time when the UN General Secretary says ‘the truly dangerous radicals are the countries that are increasing the production of fossil fuels’, Sunak is entrenching longer-term dependence on fossil fuels and undermining investment in renewables.

Of course, a Windfall Tax at any level on North Sea oil and gas profits won’t be enough to fully address the interlinked economic and climate crises. Key to that is to keep fighting for an energy system that—like our NHS—is publicly-owned and run for the good of people and the planet, not for private profit.

We will also need windfall taxes on the wider energy and other sectors making excess profits. We will need price caps on key essentials including food, rents and energy, and we will need wealth taxes.

But the left should take heart from the campaigning that has forced this concession from Sunak. The wind is in our sails. We now need to step up the campaign for the Windfall Tax to be set much higher and to be made permanent.