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Tesco chairman backs windfall tax on energy giants to tackle cost of living crisis

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top City grandee today became one of the most high-profile business leaders to back a windfall tax on energy giants as pressure mounts.

John Allan, chairman of Tesco and Barratt Developments, said the case for a one-off tax on energy company profits was now “overwhelming.”

He told the BBC’s Today Programme: “I think there’s an overwhelming case for a windfall tax on profits from those energy producers, fed back to those most in need of help. That’s the single biggest thing I think could be done.”

Allan said he was speaking in a personal capacity but his comments will carry huge weight. He was formerly the head of the Confederation of British Industry (CBI) and has been a serial non-executive director.

Ed Miliband, shadow climate secretary, tweeted: “Senior business leaders are now calling for a windfall tax on oil and gas companies.

“As the cost of living spirals for working people, the Conservatives are out of step with the mood of the country.”

The Labour Party and the Liberal Democrats have both been pushing for a one-off tax, stepping up calls last week after BP and Shell delivered record quarterly profits.

Allan said energy companies were probably “expecting” a windfall tax, adding: “I doubt they would be much fazed by it.”

The comments came as Centrica, the owner of British Gas, told investors its profits this year would be “around the top of the range” of recent City forecasts after a “strong operational performance in the first four months of 2022”. It puts Centrica on track for adjusted profits of around £1.4 billion this year, up from £948 million last year.

As well as delivering power to people’s homes as British Gas, Centrica trades gas and produces fossil fuels. Soaring oil and gas prices have boosted revenues at Centrica’s energy trading arm, which has “managed increased commodity price volatility well”.

Centrica defended its record today, saying it was spending £50 million on helping its customers manage the cost of living crisis. This includes grants of up to £750 to help hard-up British Gas customers pay their bills and a push to hire 500 new customer service workers as soaring bills prompt a flood of extra calls to help centres.

The company also said it was not immune to inflation and supply chain issues, which are “impacting both the cost base and customer demand.”

“We expect those headwinds to continue to, at least partially, offset underlying operational progress for the duration of this period of higher inflation,” the company said.

Martin Young, an analyst at Investec, said Centrica was more likely to raise profit forecasts as the year went on despite its caution.

Centrica said: “Significant uncertainties remain over the balance of the year, including the impacts of weather, commodity prices movements, asset performance and the potential for increased bad debt charges given the current inflationary pressures in the UK.”

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