Cost of Living

Peter Grant Excerpts

Tuesday 16th May 2023 Commons Chamber

[John Glen]

I think the principle of levelling up across the United Kingdom recognises that we do not have symmetry across the local economies of the United Kingdom, and it is about investing to improve the productive capacity. Let me make some progress.

Let me look at the economic matters at hand. As I mentioned earlier, energy costs have contributed significantly to price rises. That is why we are paying half of people’s energy bills. At the Budget, we announced that the energy price guarantee will remain at £2,500 for the next three months, funded in part by the energy profits levy. Just under £26 billion between 2022-23 and 2027-28 is expected to be raised by the levy, on top of around £25 billion in tax receipts from the sector over the same period through the permanent tax regime. This measure is saving the average family a further £160 on top of the energy support measures already announced. That includes this Government’s help for all domestic electricity customers with £400 off their energy bills through the energy bills support scheme, and in providing a £200 payment for households that use alternative fuels such as heating oil through the alternative fuels payment scheme.

Alongside holding down energy bills, increasing benefit payments, increasing pension payments, a council tax rebate, the multibillion-pound household support fund—attracting Barnett consequentials—and freezing fuel duty, we are giving up to £900 in cost of living payments to households on means-tested benefits. That means that more than 7 million households across the UK have been paid a £301 cost of living payment by Wednesday 3 May as the first of three payments. This will be accompanied by a £150 payment for people on eligible disability benefits this summer, and a £300 payment on top of winter fuel payments for pensioners at the end of 2023. The latest payment follows on from up to £650 in cost of living payments delivered to households on means-tested benefits by the Government in 2022, with an additional £150 for individuals on disability benefits and £300 for pensioner households. Altogether, support to households to help with higher bills is worth £94 billion, or £3,300 per household on average across 2022-23 and 2023-24. Aside from helping the most vulnerable, the OBR’s analysis shows that, taken together, the freezing of fuel duty, changes to alcohol duty and the extension of the energy price guarantee will further lower consumer prices index inflation by 0.7 percentage points this year.

[Peter Grant (Glenrothes) (SNP)]

Could the Minister explain to me what has happened to the energy coming out of a country such as Scotland, which is a net exporter of energy, that suddenly makes it almost three times as expensive as it was before? Where is the 200% or 300% increase that people are paying on their fuel bills going? It is not going to the people of Scotland, so who is taking that money?

[John Glen]

I have set out the number of interventions we have made to support individuals and the taxation levies on energy companies that we have set.

With inflation running high, I understand the temptation of some to accuse companies of profiteering, and the hon. Member for Paisley and Renfrewshire South (Mhairi Black) mentioned that in her opening speech. I would like to be clear with the House that the Government stand against that practice. At a time of high inflation, companies should not be seeking financial gain at the expense of their customers. Fortunately, we have not seen widespread evidence of this in the UK thus far. Corporations’ gross profits as a percentage of GDP were 21.4% in the third quarter of 2022, which is in line with an average of 22% over the last 20 years. The net rate of return for non-financial companies—a measure of company profitability—fell in the third quarter of 2022 and remains lower than 10 years previously. Instead, companies have been hit by a combination of rising labour, energy and raw material costs, and have reacted accordingly. As I have said, and it bears repeating, we do not expect them to profit excessively, but we cannot expect them unsustainably to absorb all cost increases, so the best course of action is the course we have charted thus far—to bear down on inflation.

This is a Government of action and delivery, as I have set out. We have pledged to tackle inflation, bring down debt and grow the economy, and we are doing just that. We said we would help the most vulnerable through these challenges, and we are, and we have refined and developed those interventions to suit the evolving circumstances. We are focused on strengthening our great Union, halving inflation by the end of the year, easing the pressure on households, and boosting the economy and protecting growth—proving our economy is more resilient than predicted—as well as boosting employment to well above pre-pandemic levels and ensuring more people have the security of a steady wage. As a united Government, we will continue to remain focused on what really matters to the British people.