Energy firm revenues will be capped and windfall profits taxed, Minister says

The Government will cap the revenues of energy companies, tax their windfall profits and give all of the proceeds to households and businesses, the Minister for Public Expenditure Michael McGrath said on Tuesday in the Coalition’s clearest statement yet of its emerging policy on tackling rising energy costs.

“We will provide direct support to our citizens and to our businesses and we will take money off those energy companies who are making unjustified gains,” Mr McGrath said in Mullingar today at the conclusion of the two-day Fianna Fail think-in, held in advance of the Dail’s return on Wednesday. “We will do that through the EU framework,” he added.

Mr McGrath said the EU proposals would “place a cap on the revenues that non-gas electricity generators are currently earning” and would also require a “solidarity contribution” from “primary producers of fossil fuel”.

He said that all of the money the Government receives from the cap on revenues and the solidarity tax would go directly to help households and businesses cope with rising costs.

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Mr McGrath did not indicate when the Government would receive income from the European proposals but said he expected to have an estimate of rejected revenues by the time of the budget in two weeks.

He criticised Sinn Féin’s proposals for a cap on energy bills, similar to the UK plan, saying that it would “give a blank cheque to energy companies”.

Mr McGrath promised there would be “some benefit for every household” in the budget, saying that the Government’s intention was to “put money in people’s pockets but also to protect jobs”.

“Because if you lose jobs, then the economic consequences and the fallout from that spiral, you end up with more people on social welfare, which has a direct impact on the exchequer as well. So it is in all of our interest to protect employment, and make sure that otherwise viable businesses are supported,” he said.

“And we’re not saying as a government that we will be able to fully offset all of the increases. It would be unrealistic to give that commitment, but we do recognize we need to help and we need to help households too.”

He said that businesses were facing “three or four-fold increases in energy bills”.

“Those kinds of increases are not sustainable for many businesses. Some can withstand some have the resources to absorb that scale of increase in costs, but not all of them can,” he said.

Energy credits

Earlier, Taoiseach Micheál Martin said the Government would favour further energy credits in the forthcoming budget to deal with rising energy bills rather than a price cap on energy bills.

Mr Martin said it was “an effective way” help the general population. The full impact of a cap introduced in the UK had not yet been worked out, he said on Tuesday.

There were a number of mechanisms through the social protection system to help those most in need, energy credits were an effective short term measure, he told RTÉ radio’s Morning Ireland.

Asked about which approach he would prefer between credits and caps, he said: “I favour the credit approach along with other approaches which we have executed in relation to earlier cost-of-living packages, not a cap.

“There are huge questions around the cap. Who ultimately pays for it and over what time frame? We do have tried-and-trusted ways that we can get money to people quickly in order to meet bills.”

Mr Martin has said that the Government’s priority in the budget is to protect jobs and it will intervene to do so as it did during Covid-19.

While the final figures in the budget to address the cost of living crisis were yet to be finalised, Mr Martin said that measures will be taken to address the level of increases which were “off the Richter scale”.

In the budget he said help for schools would also have to be looked after as capitation grants would not be enough to cover escalating energy costs. Some of the measures in the budget will be one off while others would last into the spring. Once “we get through the winter” the situation would be assessed “to see where we are then. “We came through Covid, we will come through this together.”

Tánaiste Leo Varadkar said the Government was awaiting European Union emergency measures expected this week before deciding on how best to help households meet higher energy costs with either price caps or energy credits, or “a combination of the two.”

“If there is a price cap, then there is less need for energy credits, but if there is not a price cap, then there is a greater need for energy credit. We just haven’t made that decision yet and we can’t make it until we know what the European position is,” he said.

“When it comes to help for families and help for businesses with their energy bills, it needs to be within weeks, not months, so we would expect a series of interventions to happen in this calendar year and then again next year,” Mr Varadkar told reporters.

The Tánaiste was speaking at the launch of the construction of a €21 million State-funded extension to the National Institute for Bioprocessing Research and Training, which trains people for biopharma manufacturing industry, on the campus of UCD in south Dublin.

Asked what form support to businesses with high energy bills might take, Mr Varadkar said ideally a system would be relative to the energy a business used but the pandemic showed the value of bringing in measures “that get money into people’s pockets quickly.”

The Tánaiste said that it was “very clear” that businesses needed help with the cost of energy.

Mr Varadkar said he was concerned about energy supply but “not unduly concerned” as the risk of black-outs or a drop in supply this winter was “as likely as it was last winter.”

In the “very unlikely” scenario were people were asked to “power down,” it was going to be large energy users, not farms, households, small businesses, schools or hospitals.