Sunak races to finalize the cost of living response after the energy bill warning
Sage Sunak is pushing for the finalization of a package that could be announced as early as Thursday to ease the living crisis, with energy regulators saying annual bills are likely to rise by more than 40% in October.
Ministers are under intense pressure to act after OffJame chief executive Jonathan Briarley wrote a letter to the chancellor on Tuesday informing him that the fuel price cap, which limits the domestic bill, could potentially hit 2,800 – a further increase of more than £ 800. – After a sharp rise in April.
“The price change we’ve seen in the gas market is actually a phenomenon that hasn’t happened in a generation since the oil crisis of the 1970s,” Brearley told MPs from the Business, Energy and Industrial Strategy (BEIS) committee.
Treasury officials are working on a windfall tax plan that could fall not only on North Sea oil and gas producers but also on power generators, including windfarm operators, which have benefited from global price increases in recent months.
It could be used to fund a direct energy bill rebate as part of a package that could cost up to bn 10bn.
In addition to targeted support for low-wage workers, Boris Johnson is seen as advocating for measures that will benefit the middle class, such as reducing VAT or pushing ahead with the 1 per cent income tax cut promised for Sunak 2024.
The pair have rival economic outlooks, and Tory MPs are increasingly frustrated that a stalemate between them has delayed radical action to help the struggling families they see operating in their constituencies.
A number of cabinet ministers, including Energy Secretary Quasi Quarteng and Brexit Opportunity Secretary Jacob Rees Mugabe, have voiced their opposition to a windfall tax, fearing it would hinder investment.
Sunak repeatedly said he was waiting for more information on what would happen to the power bill in the autumn before deciding how the Treasury would respond, and even suggested that it was “stupid” to act before that.
Following OffGame’s intervention, the Resolution Foundation warned of the potentially devastating effects of the ThinkTank Cap increase. It said an increase of about 8 2,800 in October could mean 9.6 million households across England are under fuel pressure this winter, with at least 10 per cent of their total budget defined as being spent on energy bills alone.
The shadow chancellor, Rachel Reeves, said the offgame warning was “extremely worrying”. He said: “[It] Already rising bills and rising inflation will be of great concern to families. How many more alarm bells will the Chancellor have to hear before he acts? The government needs to address this crisis and protect our families and our economy. “
Several Westminster sources have suggested that officials are now awaiting Thursday’s announcement. This time will allow the government to divert attention from the Sue Gray report on lockdown socialization, which is expected to be released on Wednesday.
However, a Whitehall insider suggested June 8 was a potential date, with Sunak and Johnson still not signing firm policy proposals.
A Treasury spokesman stressed that nothing has yet been finalized – including moving forward with a windfall tax. One person with knowledge of the department’s thinking said the package was expected to be “significant” and would be the target of the minimum wage.
A No. 10 source further suggested that the arrangements are still being finalized. “There are various options that are being considered but no decision has been made,” they said.
Charities and anti-poverty campaigners have called for improved benefits, with a 3.1% increase effective in April, a significant reduction in living standards for some poor families.
But Sunak claims that older IT systems have made it impossible. Whitehall sources further claim that the Treasury is reluctant to raise public credit after being stalled in the fight to remove £ 20-a-week during the epidemic.
Sunak’s spring statement in March was widely judged to have failed to do enough to help families struggle to end, even as some cabinet ministers were disappointed that the 22 22 billion spent so far to reduce the cost of living crisis has been poorly noticed.
Quarteng told MPs he hoped the families would get more help. “What we see now is not a complete picture,” he told the BEIS committee. “Both the Prime Minister and the Chancellor have stated that more will be announced in due course.”
Quarteng added: “These interventions may not be able to solve all the problems that consumers face, but they can go a long way in tackling the cost of living.” Johnson said last week that the government would “throw weapons around people” during the epidemic.
A Treasury spokesman said: “We understand that people are struggling with rising prices, and while we cannot afford to face global challenges, we support British families to navigate the coming months with a 22 billion aid package. “
Fuel prices pushed the consumer price index (CPI) to 9% in April, sparking criticism that the government had failed to protect millions of low-income families from choosing to feed themselves or heat their homes.
Johnny Marshall, a senior economist at the Resolution Foundation, said: “The sheer scale and depth of the crisis in Britain’s livelihoods means that the government urgently needs to provide significant additional support. The fact that the crisis is so concentrated on low- and middle-income households means that it is unclear how government policy support should be addressed.
“Facilities are clearly the best route to help the most vulnerable in the short term – whether it’s through early operating or single payments to help poor families get through the difficult winter ahead.”
Earth’s friends have called on the government to use a windfall tax to finance an immediate project to block homes. “Existing plans to strengthen the UK’s energy supply and reduce costs are not moving fast enough,” it said. “Obviously there is a growing need for emergency assistance for those unable to meet rising electricity prices, while a free road-by-road blockade program aimed at helping struggling families first can help reduce bills quickly before next winter.” The government can help finance this today by taxing the extra profits of fossil fuel companies. ”
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