Tackling Short-term and Long-term Cost of Living Increases

Laura Trott Excerpts

Tuesday 17th May 2022 Commons Chamber

[Edward Miliband]

The hon. Gentleman is absolutely right. I have been around politics for a long time, as the House knows, but I cannot remember—nobody in the House can remember—facing the kind of emergency that we do currently.

The spring statement was the most recent chance for the Chancellor to redeem himself; it was just days before the April energy price rise came into effect. It was apparent to everyone across this House and in the country that what he had offered was woefully inadequate. People were literally pleading with him to do more on energy bills, but he just doubled down on his failure. He has had three chances in the past seven months, and none of his responses has been equal to the emergency. The truth about this Chancellor is that at every step of the way he has been in denial, slow to act and wholly out of touch in his response.

[Laura Trott (Sevenoaks) (Con)]

It is right that we debate what more we can do, but does the right hon. Gentleman accept that the measures that we have put forward on the national living wage and universal credit, and the national insurance threshold changes, add up to more than he is suggesting?

[Edward Miliband]

No, I do not accept that, and I can tell the hon. Lady that 8,014 families in her constituency will benefit from the changes we are suggesting if she votes for them tonight. Let me tell her and the House what the Chancellor’s failure means in reality. This year, the basic level of universal credit for a single person aged over 25 is £334 a month. The Chancellor’s measures this April were so feeble that someone on that benefit will be expected to find as much as £50 or more a month simply to cover the increase in their energy bills. That is leaving aside the soaring costs of food and other goods. That £50 is around 15% of their income, so what are they going to do? They will not be able to afford to pay their bills, they will get deeply into debt and they will go without food. It is already happening to millions.

On Friday, in the citizens advice bureau in my constituency, I met someone who is in circumstances similar to those I described. Let me be honest: I have no idea how I would cope in those circumstances. Does any Member of this House? Maybe the Chancellor can tell us what somebody in those circumstances is supposed to do. If he cannot answer that question, it should tell him something—that he is failing in his duty to the people of this country who most need his help.

What makes the Chancellor even more culpable is that something that could help is staring him right in the face. It is something on which the case has become unanswerable, and on which the Government have run out of excuses, while oil and gas producers are making billions: a windfall tax. It is so hard to keep track of the Government’s position on a windfall tax that I have given up, but I think the Chancellor has said he is prepared to look at the idea. Honestly, the British people cannot afford to wait for him and his dithering anymore, or for his hopeless excuses.

I want to go through the hopeless excuses, because this is an important argument that this House and this country need to have. What are the Government’s excuses for not applying a windfall tax? First, they said in January that the oil and gas companies were, in the words of the Education Secretary, “struggling”. BP has its highest profits for a decade, Shell has its highest profits ever, and the boss of BP, Bernard Looney, describes the price hike as a “cash machine”—and these people say the companies are struggling. Perhaps we can have a show of hands: does anyone on the Government Benches still believe that those companies are struggling? What is the Government’s next excuse? They argue that a windfall tax will hurt investment—

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[Laura Trott (Sevenoaks) (Con)]

I welcome the opportunity to debate this topic and discuss what we can best do to help all of our constituents who are suffering today. Inflation is running at 7% here, 7.5% in Europe and 8.5% in the United States of America. The Bank of England Governor has been clear that 80% of the inflationary forces are outside the Government’s control and the reach of monetary policy, so we must look to fiscal policy to do as much as we can, while not making the problem worse by being inflationary.

I turn first to the windfall tax. It is important to get the quantum in perspective. A windfall tax is not a silver bullet. It would be worth £2 billion overall, I think, which is about £72 a household or, if we targeted that at the lowest 25%, £280 a household. Of course that is helpful, but would it solve the problem? No.

I have three concerns about the design of a windfall tax and whether we employ it. First, on protecting consumers, it is unorthodox to suggest that price reductions in a sector are best served by whacking a tax on the producers. It is difficult to see how that would result in price reductions in the sector. Of course, we have the price cap, and that would help in some respects, but without proper controls it is difficult to see how the costs would not ultimately be passed on to consumers.

Secondly, on competition in the market, we all know that the industry is volatile: BP’s profits last year were at a record low, and they are now at an enormous high. The right hon. Member for Doncaster North (Edward Miliband) was absolutely right that BP and Shell have not said that a windfall tax would be a disaster for them, but in many ways they would not say that, because they are huge players in the market and they could absorb it. The problem will be much more with the smaller players and the discouragement to competition that such a tax might result in. I strongly believe that the best way to drive down prices in the market is by encouraging competition. We have lost that recently, and I do not see how a windfall tax would encourage it or get it back in place.

Finally, we need to be clear that the best thing we can do to help everyone is drive up economic growth, which is best served by businesses creating jobs and driving consumption. If we put a windfall tax on industries at random, that will discourage investment. I am not talking about individual projects here and there, and I recognise what BP has said, but in the business environment overall we need to be extremely clear about what our criteria are for imposing windfall taxes and, therefore, the impact those will have on investment in business overall. What we cannot do under any circumstances is give up our reputation for being a stable, low-taxation economy.

That aside, I have one idea of my own to put to the Front-Bench team. I think that we should introduce a measure to make it illegal to disconnect the energy supply, similar to that for the water supply. Following privatisation in 1989, the Water Act 1989 prohibited the disconnection of the water supply to domestic customers for reasons of non-payment. Companies can therefore still take people to court for moneys owed, but they cannot cut off supply. Currently, energy suppliers cannot disconnect households over the winter months in some situations, such as those who live alone or with other people who have reached the state pension age. I propose that we extend that more widely to ensure that, in the very worst circumstances, we do not have people’s homes cut off. I hope that can be taken away and considered. More broadly, when we are talking about these issues and how we best help people, let us think about the potential quantum for the windfall tax: what it will raise, the potential harm it may cause and what the alternatives are.