Cost of living: Government set to U-turn on windfall tax

The government looks set to make a U-turn over its opposition to a windfall tax to help tackle rising bills.

Ministers had rejected the idea - put forward by opposition parties - that would see a one-off levy imposed on the profits of oil and gas firms.

But Chancellor Rishi Sunak is expected to announce the move later to fund part of a £10bn package of support.

Labour's Rachel Reeves said the government had been "dragged kicking and screaming" into the U-turn.

The shadow chancellor added: "Why has it taken so long? Why have families had to struggle and worry while he dragged his feet?

Households across the country have faced soaring costs in recent months as the prices of food, fuel and energy have all rocketed, with inflation hitting a 40-year high.

The Liberal Democrats first put forward the idea of a windfall tax on the profits of oil and gas companies - which have peaked as the economy restarted after the pandemic - in November, with Labour outlining its own version in January.

The parties said the money raised could then go towards helping those households hardest hit by the cost of living increases.

Initially, the idea was rejected by ministers, including Boris Johnson, who warned it could "deter" investment into the country.

But both Mr Johnson and Mr Sunak subsequently softened their stance, and said they took no options off the table to address the crisis.

Speaking ahead of the chancellor's announcement in the Commons - expected at 12:30 BST (11:30 GMT) - Minister Steve Barclay would not confirm if the windfall tax would be part of it.

But he told BBC Breakfast: "What we do recognise is the government needs to have targeted support, particularly for those most affected by those higher bills, and that's what the chancellor will be setting out."

The BBC understands the government will scrap a plan to give people £200 off bills from October which would be repaid over five years - instead increasing the sum to possibly double and not making people pay it back.

Additional help for those on the lowest incomes is also expected, paid for by a windfall tax that could raise up to £7bn for the Treasury.

But speaking to Sky News, Mr Barclay denied the timing of the announcement was to distract from the release of senior civil servant Sue Gray's report into lockdown parties held in Downing Street during the pandemic.

Labour's Lisa Nandy said she hoped to "finally see less dither and delay and more real action" from the government.

The shadow levelling up secretary told Breakfast: "The plan that we put forward months ago would knock up to £600 off energy bills for those who most need it.

"Everybody is struggling at the moment, but some people are really, really unable to keep their heads above water, so the chancellor could bring forward those measures today.

She added: "Every pound that goes back into people's pockets will make a huge difference."