Cost of Living Increases

Matt Rodda Excerpts

Wednesday 16th March 2022 Commons Chamber

[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 (Reading East) (Lab)]

Will the Minister give way on that point?

[Helen Whately]

I will give way, because I am about to move on to talk about energy.

--- Later in debate ---

[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.

[Ian Murray (Edinburgh South) (Lab)]

I am pleased that we are debating this important topic and I thank the SNP for bringing it to the Chamber again. Opposition parties have held a number of debates on the cost of living, which is critical for every part of the country.

The cost of living crisis really matters because millions of families across the UK face the hardship of not knowing whether they will be able to pay their bills. That worry plagued many when we spoke at the Dispatch Box on the topic in January, but in the interim, the Government have done close to zero to help. Listening to the Minister, everything in the country seems to be okay, but all her words will be no consolation to those who have to make the difficult decision about whether to heat or eat. That is the biggest single indictment of the Government to date.

In the intervening period, we have of course seen the most awful, barbaric and illegal invasion of Ukraine, which has not helped and has led to higher prices in many areas as a consequence. Yesterday, the Office for National Statistics revealed that average earnings fell 1% in the three months to January, which is the biggest fall in earnings in a decade. It is against that backdrop that working people face this crisis.

Although the Government may seek to convince people that the crisis is entirely the result of the war in Europe, the reality is that it long predates the Russian invasion. Let us be crystal clear with the public: the cost of living crisis for my constituents and every constituent across the country was with us in spades before Ukraine. One of my constituents described the crisis as “everything going up” but his wages; energy bills are due to skyrocket next month with the lifting of the energy price cap and there might be much more to come later this year.

[Matt Rodda]

My hon. Friend is making an excellent point that a lot of the pressure on families predates the current crisis by some months. There are an enormous number of food banks across the whole of the UK—in Scotland and England—and my experience of working with constituents and those hard-working charities is that there is an enormous need out there that predates the crisis in Ukraine. I hope that the Government will listen to that point.

[Ian Murray]

My hon. Friend raises a critical point and we have to keep dragging the Government back to their responsibilities as a result of being in power. Much of the crisis in our public services, including the NHS and social care, also predates covid but the Government keep telling us that perhaps that is not the case.

Inflation hit 5.5% in January and is expected to rise even further. Scots are facing the prospect of council tax, water bills and train fares rising while wages, as I have said, are falling in real terms. Perhaps unsurprisingly, the Conservative party failed to back the fully costed plans of the shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves), to tax the oil and gas companies’ excess profits to reduce people’s energy bills. Instead, the Chancellor’s response to the crisis has been to make matters worse, not better. We have already heard about the buy now, pay later scheme using taxpayers’ money to lend money back to taxpayers via the energy companies that they will have to pay back on future bills. That is not helping; that is deferring the problem.

The Government have refused to exempt VAT on skyrocketing energy bills, which was supposed to be one of the much-vaunted Brexit dividends.

--- Later in debate ---

[Ian Murray]

Yes, if we increase the additional rate on the oil and gas sector from 40% to 50%—10 percentage points extra—that will generate the money towards our fully costed plan for raising energy prices, but very well done for defending the Scottish National party, and both the Conservatives and the SNP knocked back the oil and gas sector’s windfall tax when it was brought to this House.

To go back to the central question of this debate on the cost of living crisis, many families are worried about the email dropping into their inbox telling them that a direct debit will treble, or the bill landing on the mat saying their energy bill will become unaffordable, yet both Governments refuse to ask the companies making the money, directly driven by the energy crisis and the energy prices that are generating those extra direct debits or those extra bills, to put a little bit more into the pot to help. With the SNP’s current policy in the motion, and SNP Members still will not tell us if it includes the oil and gas companies, AG Barr, a successful Scottish business that made more profit last year than pre-pandemic, would pay a windfall tax, but the oil and gas companies would not—taxing ginger, not taxing gas.

[Matt Rodda]

My hon. Friend is making an excellent point because surely the point is that, with the super-profits for these very wealthy companies, senior leaders of a number of them have been quoted as saying that they see their own business as a cash machine. If we contrast that with the day-to-day struggles of people of this country, surely he is putting forward the right policy.

[Ian Murray]

Those with the broadest shoulders should pay the most, but I just say to everyone in the country watching this who is worried about their bills that we have two Governments who could do something about this, but they are defending the profits of the oil and gas companies rather than trying to help them with their bills. We could achieve so much more if all put our shoulders to the wheel and helped with this energy crisis.