Darling seen looking at windfall energy tax

LONDON (Reuters) - Chancellor Alistair Darling is looking at imposing a windfall tax on energy companies although the government is divided on the issue, a newspaper reported on Friday.

Recent sharp increases in fuel bills have led to a public outcry in Britain.

The Times said a one-off tax on energy companies' profits was one of the measures Darling was looking at to help families struggling to meet rising food and energy costs.

The proceeds of the tax would be used to help the poorest to pay their fuel bills, it said.

However, The Times said there was growing tension within the government over a windfall tax with Business Secretary John Hutton leading the campaign against such a tax.

Asked for comment on the report, a Treasury spokesman said: "All taxes are kept under review by the Chancellor (Darling) as part of the budget process."

A government source said the Treasury did not currently have a great deal of work under way on a windfall tax, although if ministers instructed officials to work on such a tax, they would of course do so.

Hutton argues that energy companies need huge sums to pay for Britain's expansion into low-carbon energy, such as wind and nuclear power, and he fears that a windfall tax could deter foreign companies from operating in Britain, The Times said.

Recent sharp increases in fuel bills, together with large profits announced by energy companies, have fuelled calls in Britain for a windfall tax on energy companies' profits.