Calls for windfall tax as energy giants reap hefty profits amid cost of living crisis

ITV News Correspondent John Ray reports on how a pensioner is struggling with energy bills as BP reports mammoth profits for 2021

Calls are growing for a windfall tax on energy giants as they reap hefty profits while households and businesses face a cost-of-living crisis.

BP revealed it swung to a mammoth $12.8 billion (£9.5 billion) underlying replacement cost profit – its preferred measure – for 2021. This is the group's highest profit in eight years.

BP notched up $4.07 billion of profits in the final three months alone, which was better than expected and up from just $115 million (£85.1 million) a year earlier.

BP also announced more cash returns for shareholders, with another £1.5 billion (£1.1 billion) of share buybacks before its first-quarter 2022 results and a dividend payout of 5.46 cents (3.37p) a share for the fourth quarter.

The group recovered from a torrid 2020, when the pandemic sent it slumping £18.1 billion (£13.4 billion) into the red on a statutory basis – its biggest ever annual loss.

Oil and gas prices have since rebounded as economies worldwide reopened following the early stages of the pandemic.

ITV News Business Correspondent Joel Hills on BP using surplus cash to buy back shares

But the results also intensify pressure on oil firms as they reap mammoth profit hauls while households and businesses are struggling due to soaring inflation.

Calls are growing for a windfall tax on energy giants, with Labour and Liberal Democrat MPs arguing that while households are paying through the nose for gas – energy bills are set to rise more than 50% in April – the companies which extract that gas are reporting massive profits.

Supporters of the tax believe some of this money should be reclaimed to help struggling households cope with the increase, but Chancellor Rishi Sunak has so far rejected the proposals.

Shell was in the firing line last week as it reported a hefty spike in profits on the same day as Ofgem announced a near £700 rise in the energy price cap.

Energy bills have rocketed in the UK.

Ed Miliband, shadow secretary of state for climate and net zero, said: “BP’s results yet again demonstrate the case for a windfall tax.

“The boss of BP described the energy price crisis as a cash machine for his company, and the people supplying the cash are the British people through rocketing energy bills.

He added that it is "only fair and right" for oil and gas producers to make an additional contribution to families in crisis.

Liberal Democrat leader Sir Ed Davey said: “It simply cannot be right these energy companies are making super profits whilst people are too scared to turn their radiators on and terrified there will be a cold snap.

“A windfall tax is the best way to get money to the people who need it quickly, but also to make sure there is some sense of trust and proportionality in the system.”

Alongside its results, BP also announced plans to boost its spending on low-carbon and renewable energy.

Chief executive Bernard Looney said: “2021 shows BP doing what we said we would – performing while transforming.

“We’ve strengthened the balance sheet and grown returns, we’re delivering distributions to shareholders with 4.15 billion US dollars of buybacks announced and the dividend increased, and we’re investing for the future.”