Liz Truss has brushed off a growing clamour for a windfall tax on energy companies even as she admitted the UK was in a “very very difficult economic situation”.

The foreign secretary, speaking to Sky News’s Kay Burley shortly after new figures showed inflation hitting a four-decade high of 9%, admitted the surge in the cost of living was “extremely high”.

But she cautioned that a one-off tax of the sort proposed by Labour on the likes of BP and Shell – who have seen profits soar as oil and gas prices shoot higher – could deter investment.

Ms Truss said: “We are in a very very difficult economic situation. We’re facing some very very serious global headwinds. Inflation is extremely high.

“What we’re doing is working to increase growth in our economy, attract investment to the United Kingdom, to face down these global headwinds.

“But there’s no doubt it is very difficult for people across Britain and in fact across the world.”

Asked about the idea of a windfall tax, she said the UK had managed to keep unemployment low because of its success in attracting investment.

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“The problem with a windfall tax is it makes it difficult to attract future investment into our country – so there is a cost in imposing a tax like that.

“My view is that lower taxes are the best way to attract more investment – to get the businesses into this country that can create these high-paid jobs, which is what we need to face down these global headwinds.”

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