Rachel Reeves is being urged to raise taxes on businesses generating “windfall” profits linked to the US-Israel war on Iran to fund emergency cost of living support for UK households.
With the government under pressure to respond, a group of leading charities, campaigners and trade unions said the chancellor could raise billions by taxing “excess profits” linked to the conflict.
In an open letter to Keir Starmer and Reeves, the organisations – including Greenpeace UK, the National Education Union and Tax Justice UK – said energy companies, banks, agricultural commodities businesses, defence companies and tech firms stood to financially benefit from the economic fallout.
Urging Labour to strengthen its existing North Sea energy windfall tax and to introduce new levies for firms in these other sectors, the group said the extra revenue for the exchequer could be used for emergency cost-of-living support and to invest in the future resilience of the UK economy against energy shocks.
“We urge you to make this crisis a turning point for the UK. Taking bold action to systemically reform our tax system and invest in our energy security will build resilience in our economy to withstand future shocks and make life affordable for people and businesses in the UK,” the letter said.
Reeves has signalled the government stands ready to provide targeted help for households grappling with the economic fallout from the Middle East conflict amid a surge in energy prices since the onset of the war.
The chancellor has also warned companies she would not tolerate corporates profiteering from the crisis, telling bosses the Competition and Markets Authority had been put on notice to detect and crack down on price gouging.
The UK already has a windfall tax on North Sea oil and gas firms – the energy profits levy, which is due to run until 2030. However, Reeves had been planning to ease the tax before the US and Israel attacked Iran on 28 February.
There is pressure from across the political spectrum on ministers to support households and businesses and to stop companies profiting at the expense of consumers.
At the weekend Richard Walker – Labour peer, chair of Iceland supermarkets and the prime minister’s “cost of living champion” – urged Starmer to explore a profits cap on energy and fuel firms.
Highlighting pressure on Starmer before a tough round of May local elections, signatories to the letter include the campaign group Mainstream.
The group was launched late last year, with the backing of Andy Burnham, with the aim of changing Labour’s direction.
Faiza Shaheen, the executive director of Tax Justice UK, who coordinated the letter and was deselected as Labour’s candidate in Chingford and Woodford Green before the last general election, said: “Spain has already frozen rents, yet our government fails to show urgency.
“The chancellor needs to get a grip on the situation to help people already struggling, and show that this will not be yet another crisis where the rich get richer, while everyone else foots the bill.”
A Treasury spokesperson said: “The UK already has additional sector-specific taxes on the banking and energy sectors.
“We want to avoid a situation where some companies choose to exploit this crisis to unfairly hike prices for working people. That’s why we’re bringing in a new framework to clamp down on price gouging if it takes place.
“This comes alongside introducing Fuel Finder so drivers can check they’re getting a fair price at the pump.”
