Helen Whately
Main Page: Helen Whately (Conservative - Faversham and Mid Kent)Department Debates - View all Helen Whately's debates with the HM Treasury
(2 years, 8 months ago)
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The Exchequer Secretary to the Treasury (Helen Whately)
It is an honour to take part in this debate on behalf of the Government. Let me begin by reassuring the House that we in Government recognise the challenges that many households, including of course in Scotland, face with the cost of living. That is one reason why we have provided support worth over £20 billion across this financial year and next; why we are cutting the universal credit taper rate and increasing work allowances to make sure that work pays; why we are freezing fuel and alcohol duties to keep costs down; and why, last month, we announced a £9.1 billion package to help households with rising energy bills.
Given the many steps that we have taken to protect jobs and livelihoods over the last two years, no one can reasonably accuse this Government of failing to act. There was £400 billion of direct support to the economy during the pandemic, including for the furlough scheme, which protected literally millions of jobs. As our focus turns to the economic recovery, we are allocating £600 billion to gross public sector investment over this Parliament, growing the economy, and improving the lives of people up and down the country. That, as much as anything, is the story here. We have supported people, we are supporting people, and we will continue to support people. We are also determined to create the conditions, Union-wide, for them to thrive.
As the global economy has reopened following the disruption of the pandemic, inflation has risen around the world. Global energy prices have increased as factories have scaled production back up, and there is increasing demand, while supply has been disrupted. There has been a further sharp rise in global energy prices following Russia’s invasion of Ukraine. Goods prices have also risen, with global supply chains struggling to meet demand as the world economy recovers. These global factors are the main drivers of higher inflation in the UK.
In that context, we understand that some households, particularly those that are vulnerable, need support with the cost of energy. We have introduced measures to provide exactly that. For instance, the winter fuel payment provides older people with £200 towards their energy bills; it is £300 for those over 80. There are also cold weather payments. Together, those measures provided almost £2.5 billion in support to households last winter. This year, we are increasing the generosity of the warm home discount, and expanding its reach to 3 million households.
The motion mentions VAT on energy bills. Domestic fuels such as gas and electricity are already subject to a reduced VAT rate of 5%, but as the Chancellor told the House in February, a further cut to VAT on energy would disproportionately benefit wealthier households. There would also be no guarantee that suppliers would pass on any reduction to all customers, and the cut would become a permanent subsidy, worth £2.5 billion every year, at a time when we are trying to rebuild the public finances.
Ronnie Cowan (Inverclyde) (SNP)
The Minister talks about helping people. How would she categorise the increase to national insurance contributions?
Helen Whately
I just mentioned the importance of rebuilding the public finances. We know that the NHS is the No. 1 priority for the general public; it is vital that we reduce the backlogs that sadly built up during the pandemic, and that needs to be paid for.
To come back to the motion, last month we announced an additional package of support to help households with rising energy bills, worth £9.1 billion—a package that, according to the motion, the Scottish National party wants to scrap. Our package to help people includes a £200 reduction in household energy bills this autumn that will be paid back automatically over the next five years, and a £150 non-repayable council tax rebate payment for all households in council tax bands A to D in England, plus £144 million of discretionary funding for local authorities in England to support households who need support but are not eligible for that council tax rebate. As we cannot apply these council tax measures across the whole of the UK, the devolved Administrations are receiving almost £600 million through the Barnett formula. This overall approach is fiscally responsible while helping customers to manage the unprecedented increase in energy bills and helping to spread the increased cost of global prices over time.
Stewart Hosie
The Minister mentioned global prices and I was rather struck that she sounded like Gordon Brown saying that it was always someone else’s fault. It is absolutely true to say that there are global pressures causing inflation, but while some countries are capping their electricity price increases at 5%, we are allowing 50%-plus increases in domestic energy prices. For all the big numbers that she has read out, does she not understand that people cannot afford to heat their homes?
Helen Whately
We have the price cap in this country, which means that customers have been protected from the volatility in global energy prices over recent months. At the moment there is further volatility following the impact on those prices of Russia invading Ukraine, but that is not going to hit the vast majority of households’ energy bills over the coming months. We will have to get to October to see the implications of that. What we have done—as I have just mentioned; I am sorry if the right hon. Gentleman was not listening—is put in place a support package worth £9.1 billion particularly to help those who will find it more challenging to pay their bills.
John Redwood
Over the last year, the economy has grown a lot faster because the Treasury did not hike tax rates but instead went for growth. That was a great policy, so why reverse it? Is there not a danger that these tax rises and massive increases in energy prices will slow the economy down too much? If that happens, the Government will have a revenue problem.
Helen Whately
If my right hon. Friend will give me a little time, I will come on to the importance of growth to our economy, which is the right answer for the longer term in ensuring that we improve people’s standard of living.
Pressures on household finances are not generally the consequence of one single price rise; they are typically affected by an amalgam of different factors. Remedying the pressure on households therefore requires taking action on a range of fronts, not just on energy bills. Again and again, that is what this Government have done and are doing. We are acting in dozens of ways to support working families. For instance, over the winter, the £500 million household support fund has helped vulnerable households with the cost of essentials such as food, clothing and utilities. Local authorities in England have allocated the lion’s share of that funding to ensuring that it reached those who needed it most, with 50% ring-fenced for households with children. Additional funding was allocated to the devolved Administrations, including the Scottish Government, in the usual way.
We have also reduced the universal credit taper rate and increased universal credit work allowances by £500 to ensure that work pays. This is essentially a £2 billion tax cut for the lowest paid in society. It is helping around 2 million households to keep an average of an extra £1,000 per annum in their pocket. Next month, the national living wage is increasing by 6.6% to £9.50 an hour, again benefiting more than 2 million workers and meaning an increase of over £1,000 in the annual earnings of a full-time worker on the national living wage. And we are committed to going further, so the national living wage will reach two thirds of median earnings for those over 21 by 2024, provided that economic conditions allow. We have supported working families in other ways too: doubling free childcare for eligible parents, which is worth around £5,000 per child every year, and introducing tax-free childcare, which will provide working parents with 20% support on childcare costs up to £10,000.
Jim Shannon (Strangford) (DUP)
I thank the Minister for what she is saying, and I welcome the £400 million that is going to Northern Ireland under the Barnett consequentials. The Republic of Ireland has suspended VAT on fuel in the short term to try to address the issue now. Can I ask the Minister whether any discussions have taken place with the Chancellor to see whether that could be done for us here in this great United Kingdom?
Helen Whately
I am not sure I heard exactly the specifics of the hon. Gentleman’s question, but in general there is already a lower VAT rate on fuel. Overall, however, if the question is whether we should have no VAT on fuel, the Chancellor has spoken about how that would in fact disproportionately benefit wealthier households, so it simply cannot be the right thing to do when it is the less wealthy households who face the greatest challenges in paying their energy bills.
The list of what we are doing in many different ways to help households goes on and on. Increasing fuel prices are indeed a global issue, not unique to the UK. The price of crude oil has increased sharply over the past year, increasing the price consumers pay at the pump. That is why we have taken action by freezing fuel duty; drivers are being protected by the 12th consecutive year of fuel duty freezes, with the average car driver paying around £15 less fuel duty per tank, saving them a cumulative £1,900 since 2011 compared with the pre-2010 fuel escalator.
On housing, the Government are maintaining the increase to local housing allowance rates for private renters on universal credit and housing benefit in cash terms. That increase was worth an extra £600 on average in 2020-21 for more than 1.5 million households. An additional £140 million has been provided this year for discretionary housing payments for those eligible for housing support who need extra help. All that is on top of existing support for families through the welfare system, which this year will add up to £240 billion of support, including £41 billion on universal credit and £105 billion through the state pension.
Turning specifically to Scotland, on top of our energy bill support scheme, which applies there, the council tax measure in England means the Scottish Government are receiving almost £300 million more than would otherwise be the case, which they can use towards cost of living interventions.
This Government will always do what we can to help those in need, and our actions speak for themselves, but we are also determined to help people to help themselves. The Government’s plan for jobs is helping people into work and giving them the skills they need to progress and earn more, which is the best approach to raising living standards. The Government are building on the success of the plan for jobs with a total of £6 billion on labour market support for the three years to 2024-25, providing targeted additional support to help at-risk groups find work, including younger and older age groups, the long-term unemployed and people with disabilities.
Why are we doing that? Because we know that work is the best way for people to get on, to improve their lives and support their families, and because households on universal credit are at least £6,000 a year better off in full-time work than out of work.
Stephen Flynn
I mentioned earlier, and indeed the Minister will be aware, that energy prices for households are rising 14 times faster than any pay rise they may receive if they happen to be in work. What does she say to that? How is that a good thing for consumers?
Helen Whately
As I was outlining—I do hope the hon. Gentleman was listening—we have put multiple interventions in place to support people with the rising cost of living. Specifically on energy prices, on the one hand we have the price cap and on the other, the package of £9 billion in support announced literally last month, which his motion says he would like to scrap.
On top of everything we are doing to help people with the cost of living, we are helping people to help themselves through our plan for jobs, and that plan is working. The UK was the fastest-growing economy in the G7 last year, and the International Monetary Fund forecast, produced before Russia’s invasion of Ukraine, was for us to be the fastest-growing major advanced economy again this year. Unemployment has now fallen to 3.9%, below its pre-pandemic rate, and payrolled employees are at a record high.
Matt Rodda
The Minister is obviously covering a range of issues, both employment and the cost of living for households. As the right hon. Member for Wokingham (John Redwood) mentioned, is now perhaps the right time to look again at the national insurance rise, given the pressure on families and the stalling rate of growth?
Helen Whately
The Chancellor has already been asked about this, and the fact is that we have taken the difficult, fiscally responsible decision to ensure that there is a long-term funding stream, both to support the NHS to tackle backlogs and to fund the cost of social care reform. That has to be the right thing to do, going hand in hand with our determination to invest in growth in this country, which I will come to in a moment.
I will just talk for a moment more about energy. We have talked about the support for people’s energy bills, but the best way to support people with the cost of energy is to tackle the problem at source and reduce the overall cost of energy in the UK, as well as reducing demand for energy, and we have already taken steps to do that. Our investment in renewables in recent years has already reduced our dependency on gas, meaning overall that bills are now materially lower than they would have been.
Looking ahead, now is the time for us to go full steam ahead with our transition to renewables. We are investing in nuclear. We are accelerating our progress on renewables, in which Scotland plays an important part, and we are boosting energy efficiency, investing more than £6 billion in energy efficiency measures over this Parliament, including £3 billion to install energy efficiency measures in low-income homes. That will save low-income households hundreds of pounds a year off their energy bill, as well as being a fabulous growth opportunity for our economy.
The motion we are debating today specifically mentions implementing a windfall tax
“on companies which are benefitting from significantly increased profits as a result of impacts associated with the covid-19 pandemic or the current international situation”.
I am sure that SNP Members are talking about a windfall tax on North sea oil and gas. I say to them, and in particular the hon. Member for Aberdeen South (Stephen Flynn), that North sea oil and gas are important to our energy transition.
The UK Government place additional taxes on the extraction of oil and gas, with companies engaged in the production of oil and gas on the UK continental shelf subject to headline tax rates on their profits that are currently more than double those paid by other businesses. To date, the sector has paid more than £375 billion in production taxes. Those of us on the Government side of the House support the North sea oil and gas sector and its role in our energy security and our energy transition.
This Government have consistently acted whenever and however necessary to support families and businesses. It is our responsibility on their behalf to protect the public finances. Our level of debt means we are and have been vulnerable to shocks, including changes in interest rates and inflation. A sustained one percentage point increase in interest rates and inflation would cost more than £22 billion by 2026-27. Events in Ukraine are a clear reminder that there will always be the risk of further economic bumps in the road, and we must be ready. To that end, as we come out of the pandemic, we must focus even more on boosting productivity, growth and investment across the whole UK.
We are focused specifically on the three priorities that the Chancellor outlined in his recent Mais lecture: capital, people and ideas. That will help us foster a new culture of enterprise and drive growth. The Government continue to support business through the temporary super deduction to encourage firms to invest in productivity-enhancing plant and machinery assets. We are committing to unprecedented levels of investment in ideas: increasing investment in research and development to £22 billion a year, reforming and improving our tax credit system, improving access to finance, and helping small businesses through our flagship Help to Grow programme. The £4.8 billion levelling up fund will invest in infrastructure that improves everyday life across the UK, while the £2.6 billion shared prosperity fund will support our wider commitment to level up all parts of the UK. In these cases, we have public investment crowding in private sector investment, which is what will drive the growth of our economy. The spending review also confirmed a total of £100 billion of investment in economic infrastructure over the spending review period. Together, that adds up to an extraordinary, and extraordinarily ambitious, programme of investment in the UK.
The Government understand that this is a challenging time for British households, including in Scotland. That is exactly why we have acted in dozens of ways on multiple fronts for the entire United Kingdom, but it is also why we are looking to the future, focusing on our economic recovery, on growth and on skills—elements that together will raise the living standards of millions of people all across the Union.