UK minister looking at windfall energy tax-report

LONDON Aug 1 (Reuters) - British finance minister 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, together with large profits announced by energy companies, have led to a public outcry in Britain and calls for a windfall tax on energy companies' profits.

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.

Some analysts say the move could also be politically popular for Prime Minister Gordon Brown's government, whose poll ratings have slumped partly because of the deteriorating economic outlook and rising food and energy prices.

Centrica (CNA.L), the owner of utility British Gas, said on Wednesday it would raise gas and electricity prices for British households by 35 percent and nine percent, respectively, citing high wholesale gas prices.

A few days earlier, French supplier EDF Energy (EDF.PA) raised British gas and electricity bills by 22 percent and 17 percent respectively.

Centrica reported on Thursday that first-half operating profit fell nearly 20 percent to 992 million pounds ($2 billion).

Major oil companies have fended off calls for a windfall tax on their earnings, saying retail pump prices are the result of high levels of duty in Britain and elsewhere in Europe. (Reporting by Adrian Croft; Editing by Marguerita Choy)