Financial Services and Markets Bill
Rishi Sunak ExcerptsWednesday 7th September 2022
(2 years, 3 months ago)
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Rishi Sunak (Richmond (Yorks)) (Con)
It is a pleasure to contribute to this debate—albeit from a few rows further back than I had originally anticipated—and to follow the hon. Member for Hampstead and Kilburn (Tulip Siddiq). I start by paying tribute to my hon. Friend the Member for Salisbury (John Glen) for the fantastic work he did as the longest-serving City Minister to get this Bill into the fantastic shape it is in, where it is now admirably shepherded through Parliament by his very worthy successor, my hon. Friend the Member for North East Bedfordshire (Richard Fuller). I also pay tribute to the fantastic team of officials, led by Gwyneth Nurse, who have spent the best part of the past year preparing what is, I believe, the most radical and significant piece of financial services legislation that this House has seen in years, if not decades.
There is so much in the Bill to comment on that in the interests of time, I will briefly focus on three things. First, the Bill appropriately seizes the opportunities of Brexit to scrap retained EU law and move to an agile system of regulation that is tailor-made for the UK. Secondly, it reforms regulations to make sure that we support economic competitiveness. Lastly, it keeps the UK at the forefront of harnessing innovative technologies and makes sure that we keep pace in a fast-moving sector.
Rishi Sunak
Not for now.
First, on Brexit, with the future regulatory framework, the Bill represents a significant move away from relying on retained EU law as a means of regulating the UK’s financial services sector. Clause 1 provides for a full sweeping away—a full revocation—of essentially all the retained EU law concerning financial services in the UK. This is radical and this is right. Indeed, it is what Brexit was all about and this Bill delivers it.
We will move appropriately to the Financial Services and Markets Act 2020 model where the Government set the overall policy approach and delegate the operational implementation of those regulations to the independent regulators. As my hon. Friend the Minister said this is the internationally respected gold standard for how to do this. I was pleased to hear the Minister comment on the call-in power, and I urge him and the Government to quickly bring forward the means for that power, because both my hon. Friend the Member for Salisbury and I believe it is the right thing to do. We talked about accountability earlier in this debate. It must be right for a democratically elected Government, with the consent of this House, on an exceptional basis, to intervene on financial regulation in the public interest, and I hope that the Government will follow through with those plans.
On what this Bill does to support competitiveness, for the first time, our financial regulators will have a new statutory objective to support international competitiveness and growth, moving us in line with jurisdictions such as Australia, Singapore, Japan and Hong Kong. There will be new statutory panels to give better external scrutiny and challenge on the regulators’ cost benefit analyses. We heard much about the Markets in Financial Instruments Directive over the past several weeks and I am pleased that the Bill brings forward those reforms to MiFID: to remove restrictions such as the double volume cap when trading in wholesale capital markets to improve pricing for investors; to modify the transparency regime in fixed income and derivatives to remove unnecessary burdens; and to modify the commodities position limits so that market activity is not unreasonably restricted.
There are three areas on which I urge the Government to consider going further than I think we heard in the Minister’s opening remarks. First, to improve the efficiency of capital markets raising, there is an opportunity to reform European regulations in the prospectus directive. I hope the Government will bring forward draft statutory instruments for us to consider during the Bill’s passage. Secondly, the European packaged retail and insurance-based investment products directive is ripe for reform. I suggest repealing PRIIPS and replacing it with a tailor-made regime specifically for UK markets. This will eliminate a counterproductive regulation, broaden the range of products available for UK investors and, indeed, increase UK retail participation in our financial markets.
Nick Smith (Blaenau Gwent) (Lab)
Does the right hon. Gentleman think that the Bill sufficiently challenges the Financial Conduct Authority to speak up and support consumers?
Rishi Sunak
Yes, I do: the Minister touched on provisions that increase consumer protection. My hon. Friend the Member for Salisbury spent a lot of time ensuring that consumers would have that protection, particularly with regard to scams, as the Minister outlined in his opening remarks. That is an area that needs attention.
Thirdly, on ringfencing, I suggest that the Government not only accept the recommendations of the independent Skeoch review, but consider going further. I know that this is a Government with a deregulatory zeal for growth, so I suggest two areas in particular: first, to review the threshold limits, which have not been looked at since they were initiated; and secondly, to take a fundamental look at the ringfencing regime in light of the fact that it was established after the financial crisis and that we now have a full stand-alone resolution regime.
It is worth recalling that more than half of Europe’s fintech unicorns are based in the United Kingdom, so it is important that the Bill continues to support innovation. I am pleased that it does so in two specific areas. It builds on our pioneering and world-leading regulatory sandbox to include the opportunity to pilot new sandboxes for distributed ledger technology in financial market infrastructure. That has the potential not only to lower costs and improve efficiency, but to improve financial stability. I am glad that the Government are also proceeding to bring stablecoins into the payments legislation, because that will create the conditions for stablecoins issuers and service providers to operate and grow in the UK.
I ask the Minister and the Government to consider implementing all the fantastic ideas that were contained in the speech by my hon. Friend the Member for Salisbury in April regarding blockchain and crypto, notably proceeding with a sovereign gilt issue using distributed ledger technology, but also enabling the trading of exchange-traded notes on crypto on UK exchanges, where we risk falling behind Europe if we do not act.
Why does all this matter? It matters for three specific reasons. The first is jobs. The industry provides more than 1 million jobs, and not just in London and the south-east; two-thirds of those jobs are in places such as Southampton, Chester, Bournemouth, Glasgow, Belfast, Edinburgh and Leeds. It is incredibly important. Secondly, it is one of the most important industries for our economy in terms of contribution to our GDP and tax revenues, and it is something that we as a country are genuinely world-class at. There are only a handful of industries where a country can say that, and financial services is one of those for us. It deserves the support of hon. Members on both sides of this House to ensure its continued success.
Lastly and most importantly, this Bill serves as a template for what the Government want to do across the rest of their business. It takes advantage of the opportunities of Brexit, radically reforms our regulations to support innovation, growth and investment, and, although I would like the Government to go even further, it has my full support.
Oral Answers to Questions
Rishi Sunak Excerpts(2 years, 5 months ago)
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Stephen Farry (North Down) (Alliance)
The Chancellor of the Exchequer (Rishi Sunak)
The UK Government are providing £37 billion-worth of support to help families with the cost of living, and most of that support is being provided directly to households across the United Kingdom. Indeed, we are legislating to ensure that our one-off payments to those on welfare that are worth up to £650 can be paid directly to households and families in Northern Ireland.
Stephen Farry
As the Chancellor will be aware, the energy bill support scheme cannot currently be extended to Northern Ireland due to the absence of the Northern Ireland Executive, so can he update the House on what steps he is taking to put in place measures to ensure that the people of Northern Ireland can avail themselves of that support? I appreciate that it is not due until October, but there is a long lead-in time required in that respect.
Rishi Sunak
I can assure the hon. Gentleman that we want to ensure that equivalent support is provided to all Northern Irish families, and that it will be of the same value. We are currently in discussions with a variety of organisations to see how best to deliver that support, but I can give him the reassurance that it will be there in the same quantity, in the same value and at the same time.
Theresa Villiers (Chipping Barnet) (Con)
The combined impacts of the £37 billion package that my right hon. Friend has referred to, plus tax reductions such as the cut in fuel duty, are providing really significant support to people in Northern Ireland. Does he agree that that is an illustration of why people in Northern Ireland are better off as a result of the Union and of the fact that we are stronger together as a group of four nations?
Rishi Sunak
My right hon. Friend speaks with authority and experience on this topic, and of course she is absolutely right: the UK Government are ensuring that families across the United Kingdom are benefiting from the support we are putting in place. More broadly, we will do everything we can in government to protect and support the United Kingdom.
Sammy Wilson (East Antrim) (DUP)
Many of the fiscal levers the Government could use to support Northern Ireland are not available, because we are under the EU VAT regime and still subject to EU state aid rules, which would rule out many of the measures the Government would take. Is that not a reason why the Northern Ireland Protocol Bill that is going through the House of Commons is essential, in order to enable the Government to use fiscal levers across the whole UK to benefit all of the people, be they Unionists, nationalists or any others in Northern Ireland?
Rishi Sunak
The right hon. Gentleman makes an excellent point. As I said from this Dispatch Box at the time of the spring statement, we were unable to extend our VAT cut on energy-saving materials to Northern Ireland because of some of the provisions in the protocol. He will know that the legislation we have put before this House, which I am glad received support last night, will address exactly those issues.
Saqib Bhatti (Meriden) (Con)
The Chancellor of the Exchequer (Rishi Sunak)
We are not immune to the global inflationary shocks that many countries are experiencing. Indeed, eurozone inflation is north of 8%, and inflation in the United States is closer to 9%. We have the determination we need to combat inflation and reduce prices, and we have the tools at our disposal, namely strong and forceful monetary policy, responsible fiscal policy and supply-side reforms.
Mr Mark Harper (Forest of Dean) (Con)
One of the really insidious effects of inflation is that it imposes more costs on the poorest in society. What steps will the Chancellor take to make sure not just that we protect people today, but that inflation expectations are not locked in, locking in high inflation for the future, which would be the worst thing we could do for the poorest in our society?
Rishi Sunak
As ever, my right hon. Friend makes an excellent and thoughtful point. He is right about the regressive nature of inflation, which is why our recent announcements have been specifically targeted at those on the lowest incomes—the most vulnerable in our society—to help them manage through the challenging months ahead. He is also right that inflation expectations are critical, and I know that the Bank of England will act forcefully, in its words, to restrain inflation and inflation expectations, because the quicker we get through this the better for everyone, particularly the most vulnerable.
Mr Pat McFadden (Wolverhampton South East) (Lab)
It is true that inflation is affecting a number of countries, but why does the Chancellor think that the UK has the highest inflation in the G7, and why is UK economic growth forecast to be lower than in any country in the G20 next year, with the sole exception of Russia?
Rishi Sunak
When it comes to inflation, there is a variety of reasons. [Interruption.] I was very clear with the House at the time of the recent announcement that we are experiencing not only the energy shock that Europe is experiencing, but the tight labour market that the United States is experiencing. The fact that we have very many people in work and low unemployment is something to celebrate, but, obviously, that contributes to inflationary forces. Beyond that, there are smaller technical things, such as the timing of how the price cap works here and the degree of interventions in energy being upstream or downstream. When it comes to growth—we have had this debate multiple times—the Opposition seem to cherry-pick the figure that they like. Let us look at the period since the pandemic and at our growth performance. Indeed, on the OECD’s most recent figures, which the right hon. Gentleman cherry-picked, where were we in that table? We were the second highest in the G7.
Mr McFadden
The Chancellor said “celebrate”. I am not sure that there is much to celebrate in the figures that I quoted to him. Does he accept that the weakness of the pound, which increases the prices of our imports, is a major contributory factor to the inflation being experienced by our constituents, along with a continuation of the trade frictions caused by the Government’s Brexit deal? Does he have any plans to address that? I am not talking about rerunning the Brexit argument. He could take one step, which is to reach an agrifood agreement with the EU, as New Zealand has. That would reduce costs and bureaucracy for our farmers, for our businesses and, most of all, for our constituents.
Rishi Sunak
What the right hon. Gentleman said was very telling. We on the Conservative Benches do celebrate people being in work. It is critically the most important thing that we can do to help manage the cost of living, so every week in this place, we will champion those who are working and we will get others into work and support them. When it comes to the EU and our trading relationship—it is nice to hear from the Labour party that it does not want to rerun the Brexit arguments—it is very clear that there is now a growing faction on the Labour Benches that wants to do one thing and one thing only, which is to take us back into the single market.
Alison Thewliss (Glasgow Central) (SNP)
Both Labour and the Tories are Brexit parties now—a Brexit that Scotland did not vote for and wants nothing of. This year, the Scottish Government have faced more than a 5% real-terms cut in resource funding compared with last year’s Budget, and the spending review took place when inflation was at only 3.1%. It has now tripled and continues to rise. That increase will impact on Scotland’s recovery from the pandemic and place severe pressures on public services and public sector wages. Will the Chancellor increase funding to the devolved Governments in recognition of this record inflation over which he presides?
Rishi Sunak
I am so pleased to have a chance to answer Treasury orals for the first time since we saw the Scottish Government’s spending review, which was a couple weeks ago. It was interesting to read through that, because in spite of the largest increase in public spending in the United Kingdom for some decades—record increases in public spending—it is clear that the Scottish Government are now imposing austerity in local government, in education, in justice, and in the environment. All budgets are growing slower than inflation, and that is not happening elsewhere in the United Kingdom. The health budget, the people’s No. 1 priority, is now growing in England two or three times faster than it is in Scotland. Scotland is not passing on the income tax cut. We might ask: why is this? Why are these choices being made? It is because, in Scotland, the welfare budget is being increased by 50%. That is why.
Alison Thewliss
The Chancellor knows fine well that the Scottish Parliament, along with the other devolved Administrations, operates on a fixed budget. We do not have the levers that he has to increase budgets, yet we operate on that incredibly well. [Interruption.] We have a balanced budget in Scotland every year, which says a lot about the Scottish Government than his Government.
Inflation is a global problem, but individual Governments can make it easier for people to make ends meet. Ireland, for example, has cut public transport fares to allow people to save money on ticket and petrol prices, while those have soared under this Chancellor’s Administration. That is an independent country using its powers to ease the burden on commuters. The Scottish Government have already made bus travel free for under-22s, but we are at the limits of what we can do, because of that fixed budget and because of those real-term cuts to the block grant. If the Chancellor will not provide more money to the Scottish Government, will he give us the full powers so that we can do that?
Rishi Sunak
We all have to operate with fixed budgets—that is news to the hon. Lady—but there have been record Barnett settlements for Scotland of £4.5 billion a year. Beneath that, however, are the choices that Governments make. On the Conservative side of the House, we choose to support the NHS and public services; in Scotland, they are choosing to impose austerity on public services. That is the difference between us and the SNP.
Mr Richard Bacon (South Norfolk) (Con)
Following the welcome launch of Help to Build yesterday, fulfilling a commitment that the Chancellor made to me when he was still Chief Secretary to the Treasury in the early part of 2020, does he agree that making it easier for more people to commission their own houses will result in more, better, greener and cheaper houses that cost less to run, thus making a significant contribution to battling inflation?
Rishi Sunak
My hon. Friend is without doubt the House’s expert on that matter. I am pleased that the Government have listened to him. I still have the brochure he first gave me with the marvellous pictures of the custom self-build—in Switzerland, I think. There is a £1.8 billion fund, I believe, within the home building programme, and a good chunk of that will go to support exactly what he said: more homes, quicker homes and cheaper homes for all our citizens.
Dan Carden (Liverpool, Walton) (Lab)
The Chancellor of the Exchequer (Rishi Sunak)
The Government understand that many families are struggling with rising prices. That is why we have announced £37 billion-worth of support, with the bulk of that targeted on the most vulnerable in our society, and those families receiving around £1,200 of help this year.
Marsha De Cordova
The Government’s failure to increase social security benefits in line with the current rate of inflation has resulted in a real-terms cut. Many of my constituents who are in receipt of social security now face a shortfall of around 6%, based on today’s inflation rates. The Chancellor could take action now, for example by reviewing the rate of social security every six months, rather than annually in September, while we are in this cost of living emergency. Will he commit to an emergency in-year uprating in line with the rates of inflation?
Rishi Sunak
I gently point out to the hon. Lady that just a few weeks ago we announced £15 billion-worth of additional help, particularly for those on means-tested benefits, who are receiving a one-off payment of £650. The aggregate amount spent on that proposal is in fact more generous than simply uprating with inflation as she suggested, so those families will get more help under our plan than with her proposal, and that money will arrive first in July, with the second payment later in the autumn.
Joanna Cherry
The cost of living is affecting individuals and business, particularly small business, across our society. Many small cafe owners, who are important for the service sector in Edinburgh South West, are struggling. One small cafe owner wrote to me recently to say that over the past few months, every single one of her suppliers has put their prices up—from bread, to cakes, to bacon, to coffee, to waste collection and energy. My question for the Chancellor is this: is it not time that he looked at his options for further cuts to VAT to help small businesses, especially small cafes in Edinburgh South West?
Rishi Sunak
We have provided significant support to the hospitality sector over the past two years, and I am glad that the sector at least emerges from the crisis in a much stronger shape—in terms of employment, cash balances and insolvencies—than anyone had anticipated, which is something to celebrate. With regard to support at the moment, we have of course put in place a £1.7-billion business rates holiday—the 50% discount—for cafés and restaurants in England, and that money is being Barnett-ed to Scotland to provide similar support to restaurants there.
Mary Glindon
Public sector workers and care workers in North Tyneside say that the Chancellor’s package on the cost of living crisis does not address their daily financial struggles, because under his Government, their pay has not kept pace with inflation. What practical steps will he take to address that overriding problem for my constituents?
Rishi Sunak
As I said, we are providing an enormous amount of support—around £1,200—which is targeted at those who most need help. Of course, no Government can make the challenges go away completely, given the scale of the problem that we are facing, but I am confident that the support we have put in place is significant and will make a meaningful difference to those who most need it. The hon. Lady talks of the practical steps that we can all take to help with the cost of living. Perhaps her party could start by opposing the crippling rail strikes of the past week or two, which are doing nothing to ease the burdens of the cost of living on public sector workers.
Christian Wakeford
My constituents in Bury South have had inflicted on them tax and national insurance rises—the inadequate 5p cut to fuel duty barely touched the sides—by a Chancellor who has clearly run out of ideas, as we have just heard. With energy costs at record highs, and an expected further rise of up to 50% in the autumn that will mean the cap has almost trebled in under a year, what further assistance can be given to my constituents to ensure that nobody is cut off?
Rishi Sunak
I gently say to the hon. Gentleman that £37 billion of support is being targeted at the most vulnerable and will come over the next few months, from the summer through the autumn and winter, to help with the price cap. As we said, we do expect the cap to increase significantly in the autumn, which is why we have put the support in place. He talked about taxes, so he will be pleased to tell his constituents that in just a couple of weeks’ time, they will have their taxes cut when the national insurance threshold rises to £12,500, which will deliver a £330 tax cut to around 30 million people in work. That will start to put more money in people’s pay packets in July.
Mr Virendra Sharma
The tax rises that the Chancellor has introduced are making the cost of living worse for everyone. How can he defend raising taxes on working people and urging against pay rises for most people, while his colleagues recommend scrapping the cap on pay rises for FTSE 100 bosses who earn millions?
Rishi Sunak
Again, 70% of workers in this country will have a net tax cut. That is what the Government are delivering. In just a couple of weeks’ time, the first £12,500 that anyone in work earns will be free of any tax or national insurance. That will deliver a £6 billion tax cut for 30 million people. As I said, for 70% of all workers, excluding the most wealthy, it represents a net tax cut, because we are on the side of hard-working people.
Bim Afolami (Hitchin and Harpenden) (Con)
The Chancellor knows that a significant part of inflation is not within this Government’s control, and indeed not within the country’s control; it is a result of international energy costs, particularly oil and gas. That is happening globally because there is an imbalance between supply and demand across the world. What is the Treasury’s approach, working with other countries and major energy companies, to try to bring down those prices overall in the coming years? Unless we do that, increasing energy costs will be inimical to the economic growth that everybody in this House wants to see.
Rishi Sunak
My hon. Friend makes a thoughtful point, and he is right. As the Bank of England recently pointed out, the bulk of the excess inflation that we are seeing is being driven by global inflationary forces. He is also right that in the long term, the best way to combat that is to increase the supply of energy. In particular, the Prime Minister’s energy security strategy sets out a plan to do exactly that, which will have an impact on bills next year and beyond. Between now and then, we have the support in place to help people.
Mr Richard Holden (North West Durham) (Con)
We all know that energy prices, such as oil and gas prices, are being driven by Russia’s illegal invasion of Ukraine. I welcome the extra £37 billion of support for households and the cut in fuel duty. One thing that affects my constituents, particularly district nurses, is the differential between the terms and conditions for NHS workers and the normal mileage allowance, which means that an NHS district nurse in my patch doing 12,000 miles a year gets about £1,400 less than if they were on a normal mileage allowance. Will the Chancellor make representations to the Health and Social Care Secretary to try to improve that position for my district nurses?
Rishi Sunak
My hon. Friend, as always, is right on the point, and he makes a good observation. He knows from his discussions with me that the mileage allowance rates are advisory, and organisers and employers can provide whatever support they think is appropriate and justified under the circumstances. I would be happy to talk to the Health Secretary. As my hon. Friend knows, the NHS has received a record funding settlement. Where we can find efficiencies to support people, we should do so.
Philip Davies (Shipley) (Con)
Further to the question from my right hon. Friend the Member for Tatton (Esther McVey), may I urge the Chancellor to think again about the cut in fuel duty? Although the one he introduced was welcome, it has not really been noticed by many people, so will he consider a much more substantial temporary cut in fuel duty, as has been done in Germany?
Rishi Sunak
I am glad that my hon. Friend is supporting my right hon. Friend the Member for Tatton (Esther McVey). I will take all his recommendations under advisement. As my hon. Friend the Exchequer Secretary pointed out, a cut of £5 billion, together with the freezing of fuel duty, is significant, but we appreciate that that is not being felt at the pumps because of the rise in wholesale prices. I assure him that the Secretary of State for Business, Energy and Industrial Strategy is in dialogue with the Competition and Markets Authority to ensure that the fuel duty cut is being passed on.
Philip Davies (Shipley) (Con)
The Chancellor of the Exchequer (Rishi Sunak)
In common with countries around the world, the UK is experiencing global inflationary forces. We are taking action to support the country through that, with £37 billion of support targeted at the most vulnerable, but also focused on the long term in combating inflation and reducing prices through supply-side reforms, responsible fiscal policy, and a strong and forceful independent monetary policy.
Philip Davies
Many people are grateful to the Chancellor for all the support he has given to help people with their energy bills, but many businesses are also struggling with very high energy bills. Will he consider giving further support to businesses to help them through that, preferably through cutting their taxes? It would be a tragedy if the Chancellor kept all those businesses going, at huge cost, through the pandemic, only to see them come a cropper after the pandemic because of the inflationary cost pressures caused by those lockdowns.
Rishi Sunak
My hon. Friend is a champion of all the small businesses in his constituency, and rightly so. They have endured the pandemic and are bouncing back strongly on the other side, and we want to support that. On tax cuts, I hope he can reassure his small businesses that this year they are benefiting from two specific tax cuts—a cut of about £5,000 in business rates for a typical pub; and with the increase in the employment allowance, a cut of £1,000 on national insurance contributions—and we will of course support them in the years to come.
Rachel Reeves (Leeds West) (Lab)
Consumer confidence is at its lowest level since records began because working people have less money to spend, but we are not all in this together. Pay for the top 1% of earners is increasing at 20 times the rate for the bottom 10%, and all the while the Prime Minister eyes up luxury tree houses instead of fixing the broken economy. Does the Chancellor realise that, to avoid a cost of living calamity, he must address the stagnant wage crisis created by Tory policies?
Rishi Sunak
On wage policy, this is the Government who introduced the national living wage and, this year, increased the national living wage by about £1,000 a year. Combined with the cut to the universal credit taper rate and the increase in the national insurance threshold, that is significant support to those on the lowest earnings. It is right that we increase people’s wages, but the hon. Lady should start in her own office, where, I heard, she is perhaps not quite paying her own staff properly.
Rachel Reeves
Some 4.8 million people in Britain are paid less than a real living wage. That includes cleaners, caterers and security guards employed by the Government. They work hard, they pay their taxes—in Britain, Chancellor—and they have been taken for granted for far too long. Will the Chancellor guarantee that all those who work for Government, whether directly or through a contractor, will be paid a real living wage from now on so that they can afford their bills, put food on the table and support their families?
Rishi Sunak
We want everyone to be paid the national living wage. That is the law in this country. I am proud that we have increased it by £1,000 this year, which, combined with our tax cuts, is putting more money in the pockets of the lowest paid. I say again that there are lots of people being paid less than the national living wage but they should not include people in the hon. Lady’s own office.
Martin Vickers (Cleethorpes) (Con)
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
Rishi Sunak
My hon. Friend is right to highlight the need to target support on those who most need it. I am pleased to tell him that the payments will be made for those on means-tested benefits in July, with the second of those payments following a few months later, in the autumn, for those on tax credits, so that deduplication can be done.
Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
Mel Stride (Central Devon) (Con)
Our country is facing its highest tax burden since the 1950s, although it should be acknowledged that, more recently, my right hon. Friend the Chancellor has been bringing taxes down rather than putting them up. Does he agree that, with the elevated level of inflation, now is not the time for dramatic cuts, but that once inflation starts to recede—hopefully at the end of the year or into next year—that will be the opportunity to come forward with serious tax cuts to get growth and jobs going and to support our constituents?
Rishi Sunak
I thank my right hon. Friend, the Chair of the Select Committee, for his constructive and thoughtful dialogue with me on these issues. He makes an excellent point, and I direct him to the tax plan that we published at the spring statement to indicate the direction of travel on tax. There will be tax cuts in, I think, a day’s time to help people with the cost of living, tax cuts in the autumn to drive growth in business investment and innovation, and further cuts to personal taxation thereafter, once the situation stabilises.
Barbara Keeley (Worsley and Eccles South) (Lab)
Unpaid carers have seen their bills soar during this cost of living crisis. Many carers find it impossible to reduce their energy use, because the person for whom they are caring relies on electricity to power a wheelchair, a hoist or other vital equipment, yet last month the Government decided to exclude hundreds of thousands of unpaid carers of state pension age who are not in receipt of a means-tested benefit from the £650 cost of living support package by leaving carer’s allowance out of the qualifying benefits. Will the Chancellor reconsider this unfair decision, which risks putting even more carers into financial hardship?
Rishi Sunak
The hon. Lady is right to pay tribute, as we Conservative Members do, to those who care for others. She should be reassured that of the 1 million people in receipt of carer’s allowance, 60% or more will be in a household that receives the £650 or, indeed, the disability payment. Carer’s allowance itself is not a means-tested benefit.
Peter Aldous (Waveney) (Con)
Investment in clean, low-carbon energy infrastructure will be crucial to creating long-term, rewarding jobs in coastal constituencies such as Waveney. Has my right hon. Friend carefully considered the impact that changes to tax policy on electricity generators would have on investment in the UK?
Cost of Living Payments and Welfare Cap
Rishi Sunak Excerpts(2 years, 5 months ago)
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The Chancellor of the Exchequer (Rishi Sunak)
In accordance with HM Treasury’s obligations to operate the welfare cap, set out in the charter for budget responsibility, the Treasury is required to determine items of welfare expenditure within scope of the welfare cap. Today, I would like to inform the House that the cost of living payments, which I announced to this House on 26 May 2022, are outside the scope of the welfare cap.
The welfare cap plays a key role in the fiscal framework, underpinning the Government’s commitment to sustainable public finances over the medium term by setting a predetermined cap for welfare expenditure in a target year, together with a pathway and margin for welfare spending to reach that point. The cap, margin and pathway were last set out by the Government at autumn Budget 2021.
The cap will be breached if spending in scope exceeds the cap plus margin at the point of formal assessment, which will next occur in 2024-25.
The welfare cap is designed to support the management of the more predictable elements of benefit expenditure. It already categorises benefits most directly linked to the economic cycle, such as universal credit payments to jobseekers, as outside the scope of the cap.
The cost of living payments are one-off payments, designed to support millions of the most vulnerable households facing cost of living challenges as a consequence of acute global economic pressures. Given their temporary and exceptional nature, we have therefore taken the decision to categorise these payments as outside the scope of the welfare cap. As the cost of living payments are outside the scope of the cap, they will not form part of the expenditure that will be formally assessed by the OBR against the cap and pathway.
[HCWS136]
Economy Update
Rishi Sunak Excerpts(2 years, 6 months ago)
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The Chancellor of the Exchequer (Rishi Sunak)
The high inflation that we are experiencing now is causing acute distress to the people of this country. I know that they are worried. I know that people are struggling. I want to explain what is happening, why it is happening, and what we propose to do about it.
I trust the British people, and I know they understand that no Government can solve every problem, particularly the complex and global challenge of inflation, but this Government will never stop trying to help people, to fix problems where we can and to do what is right, as we did throughout the pandemic. We need to make sure that those for whom the struggle is too hard, and for whom the risks are too great, are supported. This Government will not sit idly by while there is a risk that some in our country might be set so far back that they might never recover. That is simply unacceptable, and we will never allow it to happen.
I want to reassure everybody that we will get through this. We have the tools and the determination we need to combat and reduce inflation. We will make sure that the most vulnerable and least well off get the support they need at this time of difficulty, and we will also turn this moment of difficulty into a springboard for economic renewal and growth, with more jobs, higher skills and greater investment: our plan for a stronger economy.
Before I turn to the details of our plan, let me put into context for the House the challenge we face. This country is now experiencing the highest rate of inflation we have seen for 40 years. The Bank of England expects inflation to average around 9% this year. Our exposure to global shocks continues to explain most of the inflation above the 2% target. Supply chain disruption as the world reopened from covid, combined with Russia’s invasion of Ukraine and potentially exacerbated by recent lockdowns in China, are all contributing to significant price increases for goods and energy.
However, over the course of the year, the situation has evolved and become more serious. There are areas of particular concern. Even excluding energy and food, core inflation has become broader-based and elevated. Of the basket of goods and services we use to measure inflation, a record proportion is seeing above-average price increases. Also, we are acutely exposed to the European energy price shock and, like the US, we have a tight labour market. Make no mistake, the lowest unemployment in almost 50 years, just months after averting a jobs crisis during the pandemic, is good news, but combined with the shock to European energy prices, it does contribute to the UK’s relatively high rate of inflation.
Lastly, as the Bank has noted, longer-term inflation expectations have risen above their historical averages by more than they are doing in the US and Europe. We cannot and must not allow short-term inflationary pressures to lead people to expect that high inflation will continue over the long term. We can get inflation under control. It is not some abstract force outside our grasp. It may take time, but we have the tools we need and the resolve it will take to reduce inflation. We have three specific tools available to combat and reduce inflation, and we are using them all: independent monetary policy, fiscal responsibility and supply-side activism.
First, our primary tool is a strong independent monetary policy. Since control of monetary policy was taken out of the hands of politicians 25 years ago, inflation has averaged precisely 2%. It is right that the Bank of England is independent, and I know that the Governor and his team will take decisive action to get inflation back on target and ensure that inflation expectations remain firmly anchored.
Secondly, we need responsible fiscal policy. That means providing fiscal support where required but not making the situation unnecessarily worse, causing inflation, interest and mortgage rates to go up further than they otherwise would. Excessively adding fiscal stimulus into a supply-constrained economy, especially one in which households and businesses have built up over £300 billion of excess savings, risks being counterproductive and increasing inflationary pressures. In other words, fiscal support should be timely, temporary and targeted. Timely because we need to help people when the shock is at its worst, targeted because unconstrained stimulus will make the problem worse, and temporary because if we do not meet our fiscal rules and ensure the public finances are resilient in the longer run, we create even greater risks on inflation, interest rates and the trend rate of economic growth.
Thirdly, we are taking an activist approach to supply-side reforms. This will increase our productive capacity, ease inflationary pressures and raise our long-term growth potential. The Prime Minister’s energy security strategy will reduce bills over time by increasing energy supply and improving energy efficiency. The Work and Pensions Secretary is moving half a million jobseekers off welfare and into work and doing more to support older people back into the jobs market. The Home Secretary is making our visa regime for high-skilled migrants one of the most competitive in the world, and in the autumn we will bring forward tax cuts and reforms to encourage businesses to invest more, train more and innovate more—the path to higher growth. Independent monetary policy, fiscal response ability and supply-side reform—the country should have confidence that using these three tools, we will combat inflation and reduce it over time.
But of course, we know that households are being hit hard right now, so today we will provide significant support to the British people. As I have said, a critical part of how we are dealing with inflation is responsible fiscal policy. What this means in practical terms is that as we support people more, we need to think about the fairest way to fund as much of that cost as possible. The oil and gas sector is making extraordinary profits, not as the result of recent changes to risk taking or innovation or efficiency, but as the result of surging global commodity prices, driven in part by Russia’s war. For that reason, I am sympathetic to the argument to tax those profits fairly, but—[Interruption.]
Madam Deputy Speaker (Dame Eleanor Laing)
Order. A bit of gentle banter is fine, but when it gets to the stage that nobody can hear what the Chancellor is saying, it is counterproductive. Quieter banter, please.
Rishi Sunak
But, as ever, there is a sensible middle ground. We should not be ideological about this; we should be pragmatic. It is possible to both tax extraordinary profits fairly and incentivise investment. So, like previous Governments, including Conservative ones, we will introduce a temporary targeted energy profits levy— [Interruption.] But we have built into the new levy— [Interruption.] We have built into the new levy a new investment allowance similar to the super deduction, which means that companies will have a new and significant incentive to reinvest their profits.
The new levy will be charged on the profits of oil and gas companies at a rate of 25%. It will be temporary, and when oil and gas prices return to historically more normal levels, the levy will be phased out, with a sunset clause written into the legislation. And crucially, with our new investment allowance, we are nearly doubling the overall investment relief for oil and gas companies. That means that for every pound a company invests, it will get back 90% in tax relief. So the more a company invests, the less tax it will pay.
We understand that certain parts of the electricity generation sector are also making extraordinary profits. The reason for this is the way our market works. The price our electricity generators are paid is linked not to the costs they incur in providing that electricity but rather to the price of natural gas, which is extraordinarily high right now. Other countries such as France, Italy, Spain and Greece have already taken measures to correct this. As set out in the energy security strategy, we are consulting with the power generation sector and investors to drive forward energy market reforms and ensure that the price paid for electricity is more reflective of the costs of production.
These reforms will take time to implement, so in the meantime, we are urgently evaluating the scale of these extraordinary profits and the appropriate steps to take. So our energy profits levy will encourage investment, not deter it. It will raise around £5 billion of revenue over the next year so that we can help families with the cost of living, and it avoids having to increase our debt burden further. There is nothing noble in burdening future generations with ever more debt today because the politicians of the day were too weak to make the tough decisions.
I know the whole House will agree that we have a responsibility to help those who, through no fault of their own, are paying the highest price for the inflation we face. To help with the cost of living, we are going to provide significant targeted support to millions of the most vulnerable people in our society: those on the lowest incomes, pensioners and disabled people.
First, on people on the lowest incomes, over 8 million households already have incomes low enough for the state to be supporting their cost of living through the welfare system. They could be temporarily unemployed and looking for work; they could be unable to work because of long-term sickness or disability; or they could be on low pay and using benefits to top up their wages. Right now, they face incredibly difficult choices. I can announce today that we will send directly to around 8 million of the lowest-income households a one-off cost of living payment of £650. That support is worth over £5 billion and will give vulnerable people certainty that we are standing by them at this challenging time. The Department for Work and Pensions will make the payment in two lump sums, the first from July and the second in the autumn, with payments from Her Majesty’s Revenue and Customs for those on tax credits following shortly after. There is no need for people to fill out complicated forms or bureaucracy, as we will send the payments straight to their bank account.
Our policy will benefit over 8 million households in receipt of means-tested benefits from July. Uprating in that timeframe could only be done for those on universal credit, and our policy will provide a larger average payment this year of £650, whereas uprating the same benefits by 9% would be worth only £530 on average.
There are two further groups who will need extra targeted support. Many pensioners are disproportionately impacted by higher energy costs. They cannot always increase their income through work and, because they spend more time at home and are more vulnerable, they often need to keep the heating on for longer. We estimate that many people who are eligible for pension credit are not currently claiming it, which means many vulnerable pensioners will not be receiving means-tested benefits. I can announce today that, from the autumn, we will send over 8 million pensioner households that receive the winter fuel payment an extra one-off pensioner cost of living payment of £300.
Disabled people also face extra costs in their day-to-day lives; for example, they may have energy-intensive equipment around their home or workplace. To help the 6 million people who receive non-means-tested disability benefits, we will send them, from September, an extra one-off disability cost of living payment worth £150. Many disabled people will also receive the payment of £650 I have already announced, taking their total cost of living payment to £800.
I can reassure the House that next year, subject to the review by the Secretary of State for Work and Pensions, benefits will be uprated by this September’s consumer prices index, which on the current forecast is likely to be significantly higher than the forecast inflation rate for next year. Similarly, the triple lock will apply to the state pension.
Of course we recognise the risk that, with any policy, there may be small numbers of people who fall between the cracks. For example, it is not possible right now for the DWP or HMRC to identify people on housing benefit who are not also claiming other benefits. To support them and others, we will extend the household support fund delivered by local authorities by £0.5 billion from October.
This is a significant set of interventions to support the most vulnerable in our country. We will legislate to deliver this support on the same terms in every part of the United Kingdom, including Northern Ireland. Taken together, our direct cash payments will help one third of all UK households with cost of living support worth £9 billion.
We are meeting our responsibility to provide the most help to those on the lowest incomes. I believe that is fair, and I am confident that the House will agree, but many other families who do not require state support in normal times are also facing challenging times. Is it fair to leave them unsupported? The answer must surely be no.
Although it is impossible for the Government to solve every problem, we can and will ease the burden as we help the entire country through the worst of this crisis. We will provide more support with the rising cost of energy, and that support will be universal. Earlier this year, we announced £9 billion to help with the cost of energy, including a council tax rebate of £150 for tens of millions of households.
We planned to provide all households with £200 off their energy bills from October, with the cost repaid over the following five years. Since then, the outlook for energy prices has changed. I have heard people’s concerns about the impact of these repayments on future bills, so I have decided that the repayments will be cancelled. For the avoidance of doubt, this support is now unambiguously a grant. Furthermore, we have decided that the £200 of support for household energy bills will be doubled to £400 for everyone. We are on the side of hard-working families with £6 billion of financial support.
To summarise, our strategy is to combat and reduce inflation over time through independent monetary policy, fiscal responsibility and supply-side activism. We are raising emergency funds to help millions of the most vulnerable families who are struggling right now, and all households will benefit from £400 of universal support for energy bills, with not a penny to repay.
In total, the measures I have announced today provide support worth £15 billion. Combined with the plans we have already announced, we are supporting families with the cost of living through £37 billion or 1.5% of GDP. That is more than or similar to the support in countries such as France, Germany, Japan and Italy. I am proud to say that around three quarters of that total support will go to vulnerable households.
As a result of the measures announced today and the action we have already taken this year, the vast majority of households will receive £550, pensioners will receive £850 and almost all of the 8 million most vulnerable households in the country will, in total, receive support of £1,200.
Let me put that in context. The House will have noted the news from Ofgem earlier this week that it expects the energy price cap to rise to £2,800 in October. That implies an average increase in people’s bills this year of just under £1,200, which is the same amount as our policies will provide for the most vulnerable people this year.
I know there are other pressures. I am not trying to claim that we have solved the entire problem for everyone—no Government could—but I hope that when people hear of the significant steps we are taking, and the millions we are helping, they will feel some of the burden eased and some of the pressures lifted. They will know that this Government are standing by them.
Supporting people with the cost of living is only one part of our plan for a stronger economy—a plan that is: creating more jobs; cutting taxes on working people; reducing our borrowing and debt; driving businesses to invest and innovate more; unleashing a skills revolution; seizing the benefits of Brexit; and levelling-up growth in all parts of the United Kingdom. The British people can trust this Government because we have a plan for a stronger economy, and I commend it to this House.
Madam Deputy Speaker (Dame Eleanor Laing)
I call the shadow Chancellor, Rachel Reeves.
Madam Deputy Speaker
Order. We are not going any further unless you are quiet. I call the Chairman of the Select Committee, Mel Stride. [Interruption.] I beg your pardon. It would be best if I allowed the Chancellor first to reply to the shadow Chancellor. I am not trying to change the rules; I am just trying to go a bit faster. I call the Chancellor of the Exchequer.
Rishi Sunak
I thank the hon. Member for Leeds West (Rachel Reeves) for her contribution, albeit her response was based on a fundamental misunderstanding of why now is the right time to act. Since February and March, three significant things have changed: the situation in Ukraine has altered considerably from what was first envisaged; inflation is now tacking considerably higher than was previously expected; and finally, and most importantly, we now have concrete information on the autumn and winter energy price cap. With that information, we were better able to design and to scale our policies. That is why, with time and thought, our energy profits levy has a very generous investment allowance built into it—not something proposed in the Labour party’s blunt instrument.
Because we were patient, we have been able to scale our support to the problem, which means that our proposals are in fact more generous than those offered by the Labour party. Because Labour Members rushed it, they got their sums wrong. But we all make mistakes, and being able to change course is not a weakness: it is a strength. I will not criticise the Labour party for getting it wrong, just so long as Labour can acknowledge that with this package we have got it right.
Let me address some of the specific points. I think the hon. Lady talked about energy security and, somewhat bizarrely, reflected on the lack of investment in nuclear capacity. Well, this is the Government who are correcting the mistakes of the past.
The hon. Lady asked about energy efficiency. This is the Government who are investing £6 billion to improve energy efficiency.
The hon. Lady asked about business rates. This is the Government who are delivering a 50% discount in business rates for our high streets next year.
The hon. Lady talked about growth. One of the best ways to drive growth is to drive up business investment. That is something the Labour party will never understand.
The hon. Lady also asked about VAT. This goes to the heart of the issue. VAT is worth, on average, about £140 of support; our policy, universally—to all households in this country—is worth £400. That is the reason not to do VAT. What we are doing is far more generous.
My final point—I know we are pressed for time, Madam Deputy Speaker—is about ideas. For our constituents, there are only good ideas and bad ideas, and whether we can do anything about them. This Government can, because we are always on the side of the British people. This Government have been faced with challenges unlike any other and at every step we have achieved things that the Labour party said were not possible. We averted the mass unemployment crisis that Labour predicted because of our furlough interventions. We led the country out of covid with a vaccine programme that Labour would have left us unable to deliver. Each time I am at this Dispatch Box opposite the hon. Lady, I find myself thinking the same thing: the public can see through it. They know the difference between a party playing politics and a Government trying to help. [Hon. Members: “Hear, hear!”]
Madam Deputy Speaker
Order. That is enough. Now we will hear from the Chairman of the Select Committee, Mel Stride.
Mel Stride (Central Devon) (Con)
I broadly commend the announcement. My right hon. Friend has made a significant intervention to channel billions of pounds in a targeted series of transfer payments to those who most need it, but, as he will know, similar approaches were taken in the pandemic and there were many who fell through the gaps and missed out on support.
I note the additional £0.5 billion increase in the household support fund, which is welcome. Will my right hon. Friend set out to the House how he arrived at that figure and why he feels it will be adequate for the demand?
On the issue of inflation that my right hon. Friend raised, these transfer payments will stimulate the economy—granted, they will come with some tax increases as well—but will he share with the House his assessment of the inflationary impact of the announcement he has just made?
Finally, will my right hon. Friend appear before the Treasury Select Committee immediately after recess so that we can look at these matters in greater detail?
Rishi Sunak
I thank my right hon. Friend for his questions and for his thoughtful advice on how best the Government should respond to the current situation. We put extra support into the household support fund because, very specifically, the one group of those on means-tested benefits to whom we cannot deliver money automatically is those who receive only housing benefit, because that is administered by local authorities. That is the main group that needs that specific help, but of course there may well be others, which is why the fund is there.
On the inflationary impact, I believe it will be manageable, but my right hon. Friend is right to highlight it. That impact is why it is important that the support we provide is targeted where it can make the most difference, and that it is temporary and timely, and gets help to where it is required. That is the right approach: being fiscally responsible is going to help us to combat inflation in the long run.
Kirsty Blackman (Aberdeen North) (SNP)
It is quite amusing to hear the Chancellor talk about this announcement being timely. I mean, it is timely: it just happens to have happened in the week of the Sue Gray report. It just happens that that report came out yesterday and the Chancellor has suddenly realised today that people are really struggling. He has suddenly realised that he needs to announce something.
At the spring statement, when the Chancellor announced the energy loan, he stood up and said, “Look at these amazing things that I am announcing.” He genuinely seemed to believe at that time that that was the best this Government could do. Now, he has changed his mind. He has listened to the calls of the Opposition and of the people up and down these islands who are struggling, in many cases more than they have ever struggled before.
I do not understand why the Chancellor has announced only a £15 billion package. He has £28 billion of fiscal headroom in public sector net debt and £32 billion of fiscal headroom in balancing the current budget—those are the Office for Budget Responsibility’s figures from March—yet he is refusing to spend that money now in the timely and targeted way that is needed for people now.
I am glad that the Chancellor announced money for the poorest households and that it has been targeted in that way, but it is not enough. What he has announced fails to uprate benefits; fails to account for the fact that the energy price cap that is coming in October will still be in place next year; and fails to ensure that benefits keep pace with inflation.
I have to laugh at the Chancellor’s comments about inflation. Brexit has increased food prices by 6%. Brexit has done that. People who are struggling to meet the most basic costs—the majority of their costs are for energy and food—have been hit incredibly hard by Brexit. The poorest 10% of households are seeing a massive inflationary increase in comparison to the richest 10% of households, because of the percentage of their budget that is spent on energy and food. The Chancellor needs to uplift benefits as well as making payments.
It was pretty cheeky of the Chancellor to choose to include the £150 council tax payment in all the figures he read out. That went only to people who live in homes in bands A to D. It certainly did not go to all pensioners and certainly cannot be included in the money that is going to all pensioners. It cannot be included in the money that is going to all universal credit claimants, and it cannot be included in the money that is going to all disabled people. It cannot be included in the cost of this support package because it is absolutely not universal. On that point, the payment that we made in Scotland went to a higher percentage of households than the payment made in England.
This package does not go far enough. We are going to see an energy price increase of more than £1,000 for all households because of the increase in the energy price cap, yet the Chancellor is providing only £300 extra for pensioners. That will not even touch that £1,000 increase. He is only including these things. The uplift should have been 9%, to match inflation, and there should have been a further £25 uplift to universal credit and a further £25 uplift to legacy benefits. Lastly, he has failed in the uplift for disabled people, who face the very highest cost because of the increase in energy costs and in the cost of, for example, their diets.
I am glad that the Chancellor has put in place the windfall tax. I am very disappointed that it covers only oil and gas companies. It should have gone much wider. We have been calling for this since 2020, with Kate Forbes and Ben Macpherson. [Interruption.] The Labour party failed to support our amendment on this last week, so Labour Members are a bit cheeky as well in suggesting that we have not moved on this.
I would like the Chancellor to go further, to make a difference and to actually care about the poorest people in our society.
Rishi Sunak
I know that, for some people, it will never be enough. That is why the SNP’s plans would leave Scotland with, I think, a 20% budget deficit and bankrupt the country. That is not something that we will ever do to the people of Scotland or the United Kingdom.
The hon Member’s point on food prices was surprising and slightly puzzling, given I have just returned from a meeting of Finance Ministers from around the world where everyone was talking about increasing food prices. As far as I know, they did not all leave the European Union, but I will leave that to her.
The hon. Member talked about benefits uprating. Perhaps she did not understand exactly what we were announcing. What we are doing for those on means-tested benefits is more generous than uprating. On average, uprating would be worth just over £500, whereas the one-off payment is worth £650.
The hon. Member also talked about timing. She mentioned many things that have happened this week. The other thing that happened this week is that we heard from Ofgem, and we got more certainty on what the price cap will be in autumn. That is the single most important factor in trying to size the support that we are providing to people, because it is energy costs that are the biggest driver of the inflation that we seeing now.
John Redwood (Wokingham) (Con)
When the Chancellor approved £150 billion of extra cash to be printed in November 2020 and gave a full guarantee against losses on the bonds, did he think that there could be any inflationary and public spending risk from that? I fully support giving back the huge windfall taxes that he is already collecting on energy, the VAT on fuel, the rip-off at the pumps and the much-enhanced profits tax coming from North sea oil and gas. That should be given back because people need some relief. On inflation, though, what did he think when he printed the money?
Rishi Sunak
I am grateful to my right hon. Friend for his question. He and I have talked about inflation for quite a while. He will know that I have long been concerned about the potential of rising inflation and interest rates. It is something that he and I discussed very early in my time in this job. That is why, from the beginning, I have been careful to protect our public finances against the costs of rising inflation and interest rates. I am glad that we took those decisions. Now, because of that, we are in a position to act and to support people.
Mr Clive Betts (Sheffield South East) (Lab)
I have a specific question about the household support fund. The Chancellor says—I think he is saying this—that, wherever people live, if they are in the same circumstances, they will get the same help from this fund. In other words, local authorities will have no control over how much money is spent from the fund. Will he therefore guarantee that councils will get pound for pound from the Government every pound they have to spend for the people who need it?
Rishi Sunak
No, that is not how the household support fund works. It has always been the request of colleagues in this House and indeed councils for that to be discretionary. What we generally tend to do is provide guidance on the types of people that we expect to have support, but leave the ultimate decision to those in local authorities. In this instance, for example, the particular priority ought to be those who receive only housing benefit. The fund is more than sized to deal not just with those, but with others. Ultimately, though, we leave the discretion to local authorities, with guidance provided by my colleagues at the Departments for Work and Pensions and for Levelling Up, Housing and Communities.
Mr David Davis (Haltemprice and Howden) (Con)
May I give the Chancellor an unreserved welcome for the help for ordinary citizens? I think now, cumulatively, it is worth north of £35 billion all told. However, may I raise two concerns? First, he talked about the risk of excessive fiscal stimulus. How does he reconcile that with the fact that the latest figures show that we are taking more money out of the economy than we ever have in history? Secondly, on the windfall tax, it will raise a small amount of money. Stability of tax and low tax both encourage investment and growth. Is there not a risk that the Exchequer will lose more in growth than it will gain in the windfall tax?
Rishi Sunak
I thank my right hon. Friend for his question. With regard to the figures on borrowing and stimulus, we are still running a relatively significant budget deficit this year—forecast to be 4% back in spring—so I would not regard that as a particularly tight policy on the fiscal side, and we will add further support today. With regard to tax, it is important to continue to support investment. The way we have designed the energy profits levy, with a doubling of the investment relief, will mean that companies still have a very strong incentive to invest in the North sea.
Hilary Benn (Leeds Central) (Lab)
People on pre-payment meters, many of whom are on the lowest incomes, are still paying more for their energy than people who pay by direct debit, and they are increasingly likely to self-disconnect to turn off the light and the warmth. When will the Government act to end this price discrimination against some of the least well-off members of our society?
Rishi Sunak
I know that my right hon. Friend the Energy Secretary is engaged with all the companies on how best to support people through this. With regard to the support that we have announced today, about 7% of households are on non-smart pre-payment meters and we want to make sure that we get their support to them. That has been taken into account and will be delivered through vouchers. The remaining pre-payment meters are smart, and the credit can be put straight on those meters so those people benefit.
Laura Trott (Sevenoaks) (Con)
Can my right hon. Friend confirm that, under Labour’s plans, my most vulnerable constituents in Swanley, Westerham and elsewhere will receive £600, while under our plans they will receive £1,200?
Rishi Sunak
My hon. Friend is right. The combination of all the support that we have announced means that almost everybody on means-tested benefits should be in receipt of £1,200 of direct support from the Government. As she says, that is double the support offered by the Labour party.
Christine Jardine (Edinburgh West) (LD)
The word that occurs to me today is “Finally”. After months of proud families in this country, who have never needed help before, crying out for help from the Chancellor, pensioners sitting in cold houses in the winter because they could not afford to heat them, and families unable to put food on the table, this has come as too little, too late. Liberal Democrats were calling on the Chancellor to bring in a windfall tax on the excess profits of energy companies in October, when it could have made a difference in the winter. Instead, the Chancellor was hiking up taxes and adding to the national insurance burden of those already hardest hit. What I want to say to him today is this: will he listen next time, when from those on the Opposition Benches he gets an idea or suggestion that would help the people of this country, rather than hike up their taxes?
Rishi Sunak
Seventy per cent. of those in work will pay less tax this year than they did last year because of the changes that we have made. As I have said, now is the time to act because we have more certainty over what the price cap in the autumn will be. We are two thirds of the way through the observation window. Ofgem has given us a sense, which means that we can scale the support appropriately.
Kevin Hollinrake (Thirsk and Malton) (Con)
I warmly welcome my right hon. Friend’s statement. The shadow Chancellor made a very fair point: how are we going to fund this £15 billion? Is it not also fair to ask, on the basis that the windfall tax would raise about £3 billion by Labour’s calculations: how will Labour fund all the spending plans that it has announced today and on previous occasions, and the tax reductions that it has announced today and on previous occasions?
Rishi Sunak
My hon. Friend makes an excellent point. On the last count, we have had, I think, £100 billion of spending commitments or tax reductions from the Labour party. Less than a tenth of that has been funded, despite the shadow Chancellor saying that she is committed to fiscal responsibility. It is the same old story with Labour. Ultimately, they always run out of other people’s money.
Naz Shah (Bradford West) (Lab)
I congratulate the Chancellor on pinching some of our ideas. I really encourage him to look at the 17.5% VAT as well. One of my constituents sent me a copy of bills: January 2021, electricity £10,731.70; January 2022, £48,694.56. That is a 353.745% increase. How will the Chancellor’s statement today and his intervention help the businesses in my constituency because he seems to have left them out?
Rishi Sunak
With regard to businesses, we have the energy-intensive industries support scheme, which the Business Secretary is consulting on extending and improving the generosity of, to help the most energy-intensive industries in the country.
David Duguid (Banff and Buchan) (Con)
As the Chancellor knows, I have spoken in this House and privately to him against Labour’s proposals for a windfall tax—[Interruption.] I was waiting for the heckle. In my opinion, which I believe the Chancellor shares, they were entirely too blunt an instrument and frankly punitive for the sake of being punitive. I welcome his support for those most affected by the rising costs, his more targeted and specific approach to excess profits in the oil and gas industry and the relief on investment, which is already extensive, as he knows.
I have two questions. Can my right hon. Friend provide assurance that that charge will be applied to excess profits and that those will be distinguished from the increase in profits that would be expected in the natural cycle since the downturn of the past 12 years? Will he also commit to continuing the constructive dialogue with the industry that has been evident from this Government, in the interests of energy security and the transition to net zero?
Rishi Sunak
My hon. Friend is an excellent champion of the industry, and he is right to be so, because it is an important industry for the success of our future economy. It employs hundreds of thousands of people and it invests an enormous amount. We want to see that industry succeed and I know that, with his support and this Government’s, we will make sure that that happens.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
This statement may have put out the fires, or some of the fires, on the Back Benches behind the Chancellor, but it does not provide the comprehensive support and plan that these islands require. In a 22-minute statement, which began with an explanation of our rate of inflation, he forgot—or I presume he forgot—to mention Brexit, which has directly caused a 6% increase in food prices relative to international food prices and is the reason the International Monetary Fund expects UK inflation to remain far higher than that of the rest of the G7 for a prolonged period. We have heard the wholly inadequate firefighting today, but what is his plan for the medium to long term?
Rishi Sunak
As I spelled out, over the long term, through responsible fiscal policy, independent monetary policy and supply-side activism we will combat and reduce inflation. We are making progress on all three fronts.
Duncan Baker (North Norfolk) (Con)
I warmly welcome the Chancellor’s statement. He said that into the autumn he will think about tax cuts, which would be very welcome. Will he think about raising the income tax personal allowance for millions of hard-working families? It has been kept the same for the last two tax years, but in lifting it we would start to see those families able to take more of their income home with them, which is very much needed.
Rishi Sunak
My hon. Friend is right that we want to ensure that our constituents keep more of their hard-earned money. That is why in July we will raise the national insurance primary threshold to equalise it with the income tax threshold—a tax cut for 30 million people, worth around £330 each.
Stella Creasy (Walthamstow) (Lab/Co-op)
The Chancellor says he cannot solve every problem, but there is one problem he could solve that would not cost him a penny, but would save millions of people billions of pounds. One in 10 households say it is loan repayments that are causing them destitution, with an average monthly repayment to find of around £370. In the cost of living crisis, it is the legal loan sharks and consumer credit companies that have profited from the delay in help that we have seen and the lack of regulation of their charges. This is not just “buy now, pay later”—it is all of them. When will the Chancellor follow the lead of other countries, recognise how our constituents are being ripped off by those companies, and introduce a cap on the costs of all credit?
Rishi Sunak
My hon. Friend the Economic Secretary to the Treasury is in regular dialogue with the Financial Conduct Authority to ensure that the industry is properly regulated. Last year, we also introduced the breathing space programme, for which he deserves enormous praise and which we continue to believe will help people. It provides a space where all statutory debt repayments are paused to allow families time to work through them, with the benefits that that brings.
Sir Desmond Swayne (New Forest West) (Con)
What difference in monetary policy has protected Japan and Switzerland from the levels of inflation that we are encountering here, in the United States and in the rest of Europe?
Rishi Sunak
Japan, as my right hon. Friend will appreciate, is a very particular case, but even Japan is experiencing its highest relative inflation rate in many years. For Switzerland, there are a couple of reasons. The first is a particularly strong Swiss franc, which happens at times like this. The second is a different mix of energy, which I believe from memory is provided overwhelmingly by hydro and nuclear. That is a completely different energy mix, which means that Switzerland suffers less from the shock we are experiencing.
Mr Tanmanjeet Singh Dhesi (Slough) (Lab)
Almost five months after Labour called for a windfall tax on oil and gas producers to help seriously struggling Brits, I am glad that this out-of-touch, out-of-ideas Government have had that damascene conversion and performed today’s screeching U-turn. However, it is already too late for many, including many of my constituents, who have been forced into destitution and had to choose between eating and heating. Talking of U-turns, will the Chancellor today perform another one by scrapping the national insurance tax hike? It is seriously hurting working people, and we are the only G7 country to be taxing working people so much that we now have the highest tax burden since the 1960s.
Rishi Sunak
Some 70% of people in work—including, I would imagine, the hon. Gentleman’s constituents—will pay less tax this year than last year as a result of the increase in the national insurance primary threshold. That is delivering a tax cut to the vast majority of people, but it is right that those with broader shoulders help to contribute to funding the NHS properly, as it needs.
Robert Jenrick (Newark) (Con)
There were two tasks for the Chancellor today. The first was to provide support for the poorest households, who are facing a period of extreme hardship, and on that front I think he has made all the right judgments. Direct payments are simple, easy to administer and non-recurring; the experience of doing something not dissimilar in the United States was generally positive. The second task, however, is to inject some confidence into the economy, which is facing a recession or a long period of stagnation. On that front, does he agree that we need a steady hand from the Bank of England, so that there is no further quantitative easing, with its inflationary pressures? We urgently need the supply-side reforms that he alluded to, we need delivery of the energy plan he and the Prime Minister have set out and we need to think about the tax burden in the years ahead. The Chancellor’s announcement today is heavily redistributive; that is a good thing for hard-working families and the vulnerable, but it is being paid for by higher taxes on higher earners and businesses, and in the long term we need to address that.
Rishi Sunak
I agree wholeheartedly with my right hon. Friend. He makes excellent points, and he can expect me and this Government to deliver on all the things he thinks are important.
Stephen Timms (East Ham) (Lab)
I welcome the recognition in the Chancellor’s statement that benefit rates have fallen too low in real terms, given current inflation. Does he agree that it is time now to rethink the mechanism through which benefits are uprated—he has referred to the IT problems that have constrained him—and the level at which benefits are set?
Rishi Sunak
I am sure my right hon. Friend the Work and Pensions Secretary is the best person to talk about the implementation of benefits, but the right hon. Gentleman will know that next year, benefits will most likely be uprated by September’s consumer prices index, subject to review. That will mean a very significant increase in benefits next year, in excess of the rate of inflation, which will be very positive for those in receipt of them.
Mrs Natalie Elphicke (Dover) (Con)
Does my right hon. Friend agree that, in addition to the vital, significant and welcome help with the cost of living, it is also important to continue to invest and create jobs in the economy? Will he join me in welcoming the £80 million investment made by the Treasury and Her Majesty’s Revenue and Customs in the White Cliffs HMRC border facility, which will bring 400 jobs to Dover and Deal and help to secure customs and tax revenue, border control standards and the UK tax base?
Rishi Sunak
I know that is something my hon. Friend rightly cares passionately about for her community. She is right that the best way of helping people with the cost of living—indeed, the best way to help them to provide a better life for their families—is through well-paid work. That is why we are so focused on helping people into work and providing jobs. It is worth bearing in mind that someone moving off universal credit and into work is £6,000 a year better off. That is why we are wholeheartedly focused on moving people into work, and my right hon. Friend the Work and Pensions Secretary deserves enormous credit for that.
Dame Angela Eagle (Wallasey) (Lab)
If the excess profits of the energy companies persist beyond this year, will the windfall tax persist? Will the Chancellor explain how the sunset clause works? Will he also explain why, when his super-deduction of 130% of investment has so far failed to spark the kind of investment he thought it would, he thinks a 90% investment allowance for the oil and gas companies will work?
Rishi Sunak
We will put a backstop sunset clause in the legislation with the energy profits levy. It will remain in place until prices return to a more normal level. In the past, that was specified specifically. We will take the time to get that right, but it will not be automatic in 12 months. It will depend on when prices return to a more normal level.
Edward Timpson (Eddisbury) (Con)
Over and above the up to 30 hours of free childcare for three and four-year-olds and 15 hours for disadvantaged two-year-olds, there is also tax-free childcare that could help to alleviate the pressure of the cost of living for many families in Eddisbury and across the country, but only one in five eligible families take up the scheme. That has led to an underspend of about £2.5 billion over the past four years. What is my right hon. Friend going to do to help those families get the support they are entitled to to help them through this difficult time?
Rishi Sunak
My hon. Friend is rightly passionate about that subject, which he knows a lot about. Both the Education Secretary and the Exchequer Secretary are working hard to combat the low take-up of tax-free childcare. It is a generous benefit worth up to £2,000 a year and we want to make sure that everyone who can benefit from it does so.
Ian Paisley (North Antrim) (DUP)
This is a significant intervention in the economy—there is absolutely no doubt about that—and the Chancellor has said it is for the whole of the UK, which is one of the reasons why we celebrate being Unionists. The Road Haulage Association has indicated that the cost of living is higher in Northern Ireland by 34%. With that in mind, can the Chancellor confirm that the measures announced today apply to Northern Ireland without exception and whether the EU will have to be consulted about any of the measures before they apply?
Rishi Sunak
As I said, when it comes to all the direct payments through the welfare system, we will take legislative powers to deliver them directly in Northern Ireland, where we believe we have the operational capacity to do so. As for the support for energy bills in the autumn, we are open to exploring how best to deliver that support to those in Northern Ireland. Ordinarily it would be Barnetted—it is worth £165 million—because, as the hon. Gentleman will know, the energy market is separate to that in the rest of Great Britain, but if there is a way for us to deliver that support directly, we are open to doing so. We just need to see whether there is a mechanism to do so.
Sir Robert Neill (Bromley and Chislehurst) (Con)
The London Borough of Bromley has the highest percentage of pensioner households in the whole of Greater London, and my right hon. Friend’s well-targeted initiative will be very much welcomed by my constituents. Equally, of course, in the longer term, inflation is a threat to their pensions and fixed incomes. Will my right hon. Friend assure me that as well as dealing with the immediate pressures now, we will pursue a policy of non-inflationary growth? Above all, that must surely come from market and other reforms to improve our comparatively low level of productivity. Will he make that a priority going forward?
Rishi Sunak
My hon. Friend is absolutely right and I know that he is a champion for pensioners in his constituency. I hope that he will be pleased by today’s news that they will receive an extra £300 this winter to help get them through. His point about the long run is right. My belief is that if we can get businesses to invest more, train more and innovate more, spurred on by tax reductions and reforms this autumn, we will be able to drive up our growth and productivity.
Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)
I welcome the fact that the Chancellor has accepted many of Labour’s calls, but my constituent who is on £1,300 take-home pay and pays a rent of £800, council tax of £100, debt repayments of £100 a month, travel costs of £100 a month and fuel costs of £200 a month is left with nothing to eat with. He is ineligible for universal credit and because he lives in a block of rented flats where the landlord redistributes the fuel, he will also be ineligible for the fuel rebate. Will the Chancellor confirm to councils that their discretionary money must prioritise people who live in park homes or who receive their fuel from their landlords, so that they can get support as well, because they are currently excluded?
Rishi Sunak
I am very happy to take away that suggestion when we design the guidance for the discretionary fund.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
It will come as no surprise to the House that I have had my concerns about the implementation of a windfall tax on the oil and gas industry, so I thank the Chancellor for his engagement with me and colleagues, including my hon. Friend the Member for Banff and Buchan (David Duguid), and for resisting the ideologically driven smash-and-grab raid proposed by Labour. I also thank him for doubling the investment allowance to encourage people to invest in the North sea. There is still worry in the industry and in my constituency, so will the Chancellor commit to come to the north-east of Scotland to meet me and industry leaders to ensure that we retain the higher skill, high-wage jobs in my part of the world and ensure that we invest in an industry that is driving us towards net zero and making us more energy independent.
Rishi Sunak
My hon. Friend is a champion for the industry and is right to be so. I am happy to come and meet him and representatives from the sector, because I share his view that the industry is an important part of our economy and of our future. As he said, it helps us transition to net zero and improve our energy supply.
Kirsten Oswald (East Renfrewshire) (SNP)
The SNP supports action—at last—on a windfall tax. As my hon. Friend the Member for Aberdeen North (Kirsty Blackman) pointed out, we first called for that in 2020. Energy companies, which are disproportionately based in Scotland, are not the only businesses to make excess profits during the pandemic and the crisis period. Did the Chancellor not give any consideration to expanding the tax to other companies that are unfairly benefiting from significantly higher business, such as Serco or Amazon, to make sure that Scotland does not carry a disproportionate burden of funding a UK-wide response?
Rishi Sunak
No, we are not giving consideration to that. As I said, we are giving consideration to excess energy profits being made in other parts of the sector, on the generation side. As I said, we will examine the scale of that challenge and the right steps to address it.
Richard Drax (South Dorset) (Con)
I warn my right hon. Friend that throwing red meat to socialists by raising taxes on businesses and telling them where to invest their money is not the Conservative way of encouraging those who create our prosperity and jobs to do just that. Does he agree that by setting this bar we are in danger, were we ever to lose power, of allowing the socialists to raise it, which they would do with relish again, again, and again?
Rishi Sunak
I thank my hon. Friend. What I would say to him is that I believe that a pragmatic and compassionate Conservative Government would act to provide support to the most vulnerable at a time of great need and that a fiscally responsible Conservative Government would look to try to fund as much of that as possible in as fair a way as possible.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Recent research by 38 Degrees has shown that in Feltham and Heston, 68% of the population are experiencing more expensive energy bills, 78% are experiencing more expensive groceries and 25% have seen household incomes cut by the cut to universal credit. That has had a massive impact on the wellbeing of families and their confidence in the future, and in being able to feed and clothe themselves and pay their rent. Landlords in blocks such as Trinity Square in my constituency have massively increased tenants’ energy bills. Can I take it from the Chancellor’s answer to my hon. Friend the Member for Brighton, Kemptown (Lloyd Russell-Moyle) that he will ensure that landlords and housing associations pass on the benefits to the hard-working families that urgently need the support?
Rishi Sunak
I am fairly certain that my colleagues the Energy Secretary and Housing Secretary previously engaged with landlords’ associations to ensure that they passed on the benefit and I am happy to talk to them to make sure that they do the same thing again.
Peter Aldous (Waveney) (Con)
I welcome the measures, although I sense that my right hon. Friend will need to keep the situation under constant review with further measures possibly required, such as a social tariff and support for those on prepayment meters, as well as initiatives to trigger significant investment in energy efficiency. Transitioning and renewable energy in the North sea is bringing good long-term jobs to coastal communities such as Waveney. I urge him to work with energy companies, as he has indicated that he will, to ensure that their investment is maximised and not undermined.
Rishi Sunak
I am happy to give my hon. Friend that assurance and to work with him and the industry, because we want to create a pro-investment environment. On energy efficiency, we are investing £6 billion over the course of this Parliament to improve the energy efficiency of public sector buildings and individual people’s homes.
Chris Stephens (Glasgow South West) (SNP)
In his statement, the Chancellor rightly raised his concern, as we all have in this House, about the number of people eligible for pension credit who are not claiming it. The latest figures suggest that £1.5 billion in pension credit is unclaimed. That is not something we should have going forward, so will he indicate whether the Government will now look at a proper take-up strategy for pension credit, or is the grant that he has mentioned today perhaps the way forward?
Rishi Sunak
I know that my right hon. Friend the Secretary of State for Work and Pensions is constantly ensuring that those entitled to those benefits do get them, and I am sure she will keep everything under review.
Sir Edward Leigh (Gainsborough) (Con)
There is ample evidence that the big retailers, which dominate the nation’s forecourts, have not passed on the cut in fuel duty, and we know that from the Platts price. I urge the Chancellor to take action to put pressure on these companies, but given our experience in this matter, does that not rather underline the fact that we Conservatives understand that there are enormous difficulties in interfering in the marketplace and that the best way to help people is an overall reduction in the tax burden?
Rishi Sunak
While I broadly agree with my right hon. Friend that that is the best way to help people over time, in a particular circumstance such as this, and given the types of people we are trying to help, I believe that direct cash transfers are the right way, rather than going through the tax system. I have talked to my right hon. Friend the Energy Secretary about the issue that my right hon. Friend raises. He is right to raise it, and I know that the Energy Secretary is focused on ensuring that the fuel duty cut is passed on.
Vicky Foxcroft (Lewisham, Deptford) (Lab)
Does the Chancellor now admit that he got it wrong in excluding disabled people from the warm home discount, which excluded 210,000 people who desperately needed help? Can I have confirmation that this announcement means that those 210,000 people are now eligible?
Rishi Sunak
The warm home discount is an existing scheme that covers only 3 million households. It is also funded by other billpayers. What we are doing today is setting out Exchequer-funded support to all those on means-tested benefits, so that anyone on those benefits will benefit from the £650. Additionally, those in receipt of any other disability benefits, which are non-means-tested, will receive £150.
Saqib Bhatti (Meriden) (Con)
I thank the Chancellor for this package. Clearly he is a Chancellor who listens and a Chancellor who does. Will he confirm that this Government will continue to focus on energy sector reform, so that we can meaningfully reduce the impact of energy costs on household bills in Meriden and across the country in the medium and long term?
Rishi Sunak
My hon. Friend is absolutely right, and that is why the Business Secretary and the Prime Minister announced the plan to reform the energy market so that we can reduce those bills over time and also double down on our initiatives to improve the energy efficiency of people’s homes, which can save them £200 or £300 relatively quickly.
Richard Burgon (Leeds East) (Lab)
The windfall tax amounts to just £5 billion, but it could have been well over double that and still left North sea oil and gas giants with the same profit levels they have had in recent years, before they benefited from this price spike. Surely the Chancellor should be doing everything he can to help people who are struggling, so why is he still letting oil and gas companies keep billions in undeserved profits?
Rishi Sunak
I think that the official Labour party view is that the windfall tax would raise £2 billion. The way we have structured ours means it will in fact raise £5 billion, which is a significant amount of revenue that will help fund the things we have announced today.
Andrew Jones (Harrogate and Knaresborough) (Con)
I particularly welcome the support that my right hon. Friend is giving to those most impacted by this surge in inflation. As part of his excellent statement, he highlighted supply-side reforms that will be most important in the medium term but will take some time to come through. Could he perhaps give a little more information about those supply-side reforms that he is intending?
Rishi Sunak
My hon. Friend speaks with experience on this matter, given his previous roles.
I will give a couple of examples. One we have touched on, which is energy supply and making sure that we can improve it, but there is also the labour market, which we know is tight. That is why it is important that we move people off welfare and into work and reform high-skill migration. Beyond that, we will go after all opportunities across all sectors where we can deregulate and improve our productive capacity.
Lilian Greenwood (Nottingham South) (Lab)
On the Chancellor’s watch, we have had 15 tax rises, and this year the UK is the only G7 country to be raising taxes on working people. He has known for months that our constituents are going hungry, sitting in the cold, worried sick about their bills and facing the biggest fall in their living standards since the 1950s. Why did it take the Prime Minister’s boozy lawbreaking being all over the news for him to finally impose a windfall tax on the bumper profits of energy companies?
Rishi Sunak
Well, we did act, and that is why there is already £21 billion of support to help people with the cost of living this year. We are adding £15 billion to that today, after having more certainty about what energy bills will be in the autumn, and that is why we have acted now.
Alun Cairns (Vale of Glamorgan) (Con)
The consumer champion and money saving expert Martin Lewis met the Chancellor on Monday, and he has published a series of requests that he was making upon the Chancellor. He has since stated:
“Wow just reading this back, I think he was listening!”
Will my right hon. Friend continue to meet consumer champions and respected individuals, such as Martin Lewis, who can provide independent assessments of policymaking and judgments on behalf of some of the most vulnerable in society? Does he further recognise that while we have two countries at war in Europe that are either large food producers or large energy providers, there will always be a time when we will not be able to answer everyone’s demands?
Rishi Sunak
My right hon. Friend makes some excellent points, particularly his macroeconomic point about the geopolitics that we are experiencing at the moment. I am happy to give him my assurance that I will continue to engage with consumer champions such as Martin Lewis. He has provided thoughtful and interesting suggestions, and I hope he will see that many of those have been met in the package we have announced today.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
Why has the Chancellor not provided additional targeted support to the half a million communal heating system customers who are not protected by the energy price cap?
Rishi Sunak
We have not changed the structure of how the price cap works—it covers what it covers. But what we have done is provide discretionary funding—already half a billion pounds this year between spring and autumn, and now an additional half a billion pounds from October through to next spring—to pick up all those who might be in particular circumstances that need additional assistance.
Huw Merriman (Bexhill and Battle) (Con)
May I welcome the Chancellor’s economic package? It is thoughtful, innovative and incredibly generous—much more so than some of the ideas that some are saying he has taken from the Opposition.
Last week, I met our fantastic citizens advice team, who work so hard locally. They had a number of measures, and he has delivered on them all. There is one remaining: they were concerned that one-off payments, generous as they are, can sometimes be difficult for people with particular challenges to manage. Will he look at that in the roll-out and ensure that we can help the people who perhaps need it the most?
Rishi Sunak
I thank my hon. Friend for his support and join him in paying tribute to our fantastic citizens advice bureaux for the fantastic work they do. He makes a good point, which is one reason why the payment will be staggered into two tranches. It will not come all in one go: the first tranche will come in July and the second later in the autumn. That will help to address the issue that he raised.
Rachel Hopkins (Luton South) (Lab)
Energy-intensive businesses and sectors such as automotive manufacturing are facing huge challenges due to soaring energy prices. Companies such as Vauxhall in Luton South need some specific support to keep plants running efficiently and to keep people in skilled jobs. Can I hear from the Chancellor a commitment to our manufacturing sector and what support he will provide to it, as it is so critical to our UK economy?
Rishi Sunak
I do believe that the sector is important to our future, which is why it is being supported with a very significant tax incentive to invest with the super deduction, which we have said we will replace when it expires next spring with further support. Indeed, our energy-intensive industries benefit from around £2 billion of direct intervention with their energy bills.
Mary Robinson (Cheadle) (Con)
I welcome this statement from my right hon. Friend. In particular, I welcome the increase in the household support fund. This targeted intervention is exactly what people need. It will be going through the councils, which we have relied on in the past to distribute these funds, notably during the covid crisis. Will he have conversations with our councils to ensure that they have the resources they need for any extra work they need to do? Will he join me in thanking them in advance for the work that they will be doing on this?
Rishi Sunak
As a former local government Minister, I am very happy to join my hon. Friend in paying tribute to our councils for the fantastic work they did during covid and continue to do to support their residents, our constituents, through the challenges ahead. I am happy to tell her that we have a new burdens formula that compensates councils, when it is triggered, with the funding they need.
Dave Doogan (Angus) (SNP)
I do not know if the Chancellor has been to Scotland recently, but I reassure him that we will not be taking any lectures from him on Scotland’s viability as an independent state, sitting as he is on £2.2 trillion of sovereign debt built up by him and the Labour party.
On today’s announcement, what discussions has the Chancellor had with upstream oil and gas manufacturers such as Halliburton and Baker Hughes in my constituency about their future? There is a sunset clause that protects energy companies and reduces the burden when prices come down, but where is the sunset clause for ordinary households? How can they know how long their support will last?
Rishi Sunak
As ever, we keep all situations under review with regard to providing support to households. We know, however, that the most vulnerable are likely, subject to the review of the Secretary of State for Work and Pensions, to see a significant increase in welfare and pension payments next year, based on September’s CPI, which will be significantly in excess of the inflation forecast for that year.
Mike Wood (Dudley South) (Con)
The Chancellor’s £15 billion package will make a massive difference to a lot of people in Dudley South, but can he tell me what distributional analysis he has done on that package? How does that compare with the impact of abolishing VAT on domestic energy?
Rishi Sunak
My hon. Friend makes an excellent point. We have published a distributional analysis today, which I point him to, which shows that the package that we have announced is extremely progressive in nature, with those on the lowest incomes benefiting most. Some three quarters of what we have announced will go to the most vulnerable households, including pensioners. A flat rate payment has the benefit of being more progressive than VAT, which obviously gives very high, or higher, tax discounts to those who are particularly wealthy or have large houses and energy bills.
Jessica Morden (Newport East) (Lab)
In acknowledging the Government’s long-overdue U-turns today, we should be clear that the delay has cost people dearly. I relay to the Chancellor that this week, a local housing association told me that it is seeing under-25-year-olds, who are shamefully paid a lower rate of universal credit, using it all on gas and electric bills that are made worse by sky-high standing charges, which account for £3.50 out of every £10 and are particularly high in south Wales. What is he doing to address those long-term issues?
Rishi Sunak
The Energy Secretary is engaged in a conversation with the industry, the Competition and Markets Authority and others about ensuring that our energy market works fairly for consumers. I know that he will treat those matters as a priority.
Greg Smith (Buckingham) (Con)
Is not a huge risk of increasing tax on businesses that they will seek to pass that increased overhead back to consumers? Although the energy price cap will protect people on mains gas and stop that happening to them, a huge proportion of households and businesses in my constituency rely on domestic heating oil and liquefied petroleum gas. What mechanism will my right hon. Friend put in place to ensure that businesses with a higher tax burden do not seek to pass that cost back to those consumers?
Rishi Sunak
In general, the evidence from previous iterations shows that that does not happen, mainly because those commodities are traded at international prices, so the domestic tax regime does not change the price that is being passed on, but I am happy to take my hon. Friend’s point away.
Paul Blomfield (Sheffield Central) (Lab)
The Chancellor talked about supporting the most vulnerable, but there appear to be questions about his targeting when we look at the detail in the announcement. Everybody accepts that the most effective way to get support to those most in need would be to restore the universal credit uplift and extend that to those on legacy benefits. Why is he ideologically opposed to the action that would have made the biggest difference to the hardest hit?
Rishi Sunak
Again, perhaps the hon. Gentleman did not hear what I said. We are extending the support to all those on means-tested benefits, not just those on universal credit, who account for less than half of all households on means-tested benefits. What we are doing is more comprehensive than what he is suggesting and, in fact, it is more generous, because £650 of support is more generous than uprating, which in aggregate, on average, would be worth only just over £500.
Gareth Davies (Grantham and Stamford) (Con)
Since 2011, the basic state pension has gone up by 35%. Today, pensioners across Grantham and Stamford are seeing additional support at this very difficult time. Does the Chancellor agree that, ultimately, we need to improve the culture of saving for a pension in this country, so that pensioners are well prepared for future challenges?
Rishi Sunak
My hon. Friend is thoughtful on that topic, and he is right. Previous Governments have reformed auto-enrolment to bring about that change in culture. The advantage that we are seeing now, with financial technology making it far easier for people to access and direct savings, means that we should only see that grow, and we will help to encourage it.
Munira Wilson (Twickenham) (LD)
I am sure the U-turn Chancellor will join me in congratulating the architect of one of his previous U-turns, Marcus Rashford, on his recent engagement. Rashford’s campaigning on free school meals reminded us all how vital it is that every child gets a decent hot meal every day at a time when families are struggling to put food on the table. While food prices have risen by almost 7% in the last year, however, funding for infant free school meals has risen by just 4p since they were introduced by the Liberal Democrats in Government in 2014. How does the Chancellor recommend that schools make up the shortfall—by cutting portions for hungry children, or by sacking teachers?
Rishi Sunak
We are continuing to put record amounts into schools’ budgets—more than £14 billion over the next few years. We hear a lot from Opposition parties about the tax burden, but we are actually funding public services. It is incumbent on all those who are calling for even more investment in our schools and our NHS to at least say how they would fund that.
Jack Brereton (Stoke-on-Trent South) (Con)
I very much welcome the additional measures announced today, which will help many families across Stoke-on-Trent South. There is one industry, however, that is in need of more support: many ceramics producers in Stoke-on-Trent have not been eligible for much of the support announced in the energy security strategy. Will my right hon. Friend look at further support that could be offered, particularly to ceramics producers in Stoke-on-Trent?
Rishi Sunak
My hon. Friend is a brilliant champion for the ceramics industry in Stoke. I have been pleased to meet him and his constituents on multiple occasions. This is something that the Energy Secretary is looking at to ensure that our support for energy-intensive industries gets to the people who need it most, and I will happily mention this to him.
Ruth Cadbury (Brentford and Isleworth) (Lab)
By doubling onshore wind capacity, £6 billion could be saved on household bills. It would also reduce our dependence on imported energy, contribute to our net zero targets and create thousands of jobs. Is the Chancellor still blocking the development of onshore wind?
Rishi Sunak
If the hon. Lady looks at the energy security strategy that the Prime Minister and the Energy Secretary published, she will see that there is a section specifically about more onshore wind, with the consent of communities, and making sure that they benefit from that development.
James Wild (North West Norfolk) (Con)
With the big increases in energy prices and other bills, my right hon. Friend is correct to bring forward these further comprehensive proposals to help the most vulnerable people. This response is rooted in Conservative values, and is better targeted at those most in need than the proposals put forward by Labour. Will he bring that strong focus to delivering the investment, growth and supply-side reform that we need?
Rishi Sunak
My hon. Friend is right that this intervention accords with our values by supporting those most in need at a time of acute distress, but he is also right to focus on the long term. The best way to help people over time and sustainably is to ensure that we have a growing economy with more jobs, higher wages and better skills. That is what we will deliver.
Alan Brown (Kilmarnock and Loudoun) (SNP)
After the Chancellor’s previous announcement of the £150 council tax rebate and the £200 energy bill rebate, 6.5 million households were still classed as fuel-poor. That is 6.5 million households where people will be ill and more likely to die early. With the cap rising to £2,800 in October, there are predicted to be 12 million fuel-poor households. Some of today’s measures are very welcome, but they will just keep the most vulnerable standing still. How many more millions of households will go into fuel poverty in October because of his lack of real action?
Rishi Sunak
As I have said, it will be a difficult time, given the degree of shock that we are seeing to energy prices. We know that energy bills will, on average, will increase by about £1,200 this year. Roughly, most of the 8 million most vulnerable households should receive support worth around £1,200.
Mr John Baron (Basildon and Billericay) (Con)
The Chancellor and the Government are absolutely right to recognise that more needs to be done, but I suggest to him that generally, lower taxes bring forward greater prosperity over the medium to longer term. As high inflation will be less transitory than many believed—banks were saying only a few months ago that it would be transitory—will he consider raising the minimum wage above inflation to help the lowest paid, given that unemployment is at a record low, and scrapping the corporation tax increases to help industry pay for that?
Rishi Sunak
I am proud that the minimum wage has gone up significantly this year, which puts £1,000 extra into people’s paycheques. Actually, we have a long-term target to increase it to two thirds of median earnings, which will ensure that it tends to rise faster than inflation in normal times, but I am happy to work with my hon. Friend on making that happen.
Rachael Maskell (York Central) (Lab/Co-op)
The Chancellor is slowing one crisis while accelerating another: the climate crisis. Why is he investing in hydrocarbons, which should be staying in the ground, instead of investing in retrofitting properties, which would ultimately save energy costs, as Labour has proposed, and would make a real difference to people’s energy bills?
Rishi Sunak
Unlike the Labour party, we believe in the North sea and in our domestic energy industry. It employs hundreds of thousands of people, and it will help us to increase our energy security, and to transition to net zero. That is why it is wrong to stigmatise it and absolutely right to support it, and to support its investment ambitions as we do.
Ben Lake (Ceredigion) (PC)
The Chancellor is of course aware that some 20% of households in Wales are not connected to the mains gas grid, and in rural areas such as Ceredigion that proportion is significantly higher. Will he confirm that the £400 grant he announced today will apply to off-grid homes, and if so, what if anything will those people need to do to receive the support?
Rishi Sunak
The hon. Gentleman raised this recently, rightly. As a rural MP, I share his concerns. The energy bill rebate is based on electricity metered, rather than gas, so it will apply both to his constituents and to mine.
Ruth Jones (Newport West) (Lab)
I thank the Chancellor for his statement; the constituents of Newport West will be grateful that he has acted to help them in some small way at long last. However, can he confirm that only those who are already receiving benefits or who started a claim before 25 May will get the first instalment of the £650 he outlined in his statement? Am I right in thinking that this means that a woman leaving an abusive relationship today and needing to claim for the first time will not get this instalment?
Rishi Sunak
The hon. Lady is right that there is of course an eligibility date deadline so that we can process one-off payments, but that is part of the reason why we have staggered the payments in two tranches: to make sure that we catch those who arrive on to the welfare bill between those payments. There will be a stretch period between them to catch as many of those people as possible.
Taiwo Owatemi (Coventry North West) (Lab)
For months now, I have been telling the Chancellor about the financial struggles that many families in my constituency of Coventry North West have been facing. This autumn, families face an energy cap rise of more than £800, which comes on top of record-high inflation. Can the Chancellor honestly tell each and every one of my constituents that today’s announcement is the right decision at the right time? From where I am standing, this feels like a classic example of too little, too late.
Rishi Sunak
This is the right decision at the right time. We are providing up to £1,200 of support to the most vulnerable third of households in this country. As I have said, that is roughly similar to the average energy bill increase that we are likely to experience over this year.
Ian Byrne (Liverpool, West Derby) (Lab)
Can the Chancellor tell me if the Treasury has estimated the basic cost of living per week for a single adult, and for different-sized households—yes or no? If it has, how much is it?
Rishi Sunak
I am not sure that I followed the hon. Gentleman’s question, but I know that while many families are facing difficult times, we are providing significant support for them—in total, £37 billion, or 1.5% of GDP. The support we announced today and in February is worth up to £1,200 for a typical vulnerable household—a third of the country.
Kim Johnson (Liverpool, Riverside) (Lab)
In my Liverpool, Riverside constituency, 10 children in a class of 30 are living in poverty, with two thirds living in working families on poverty wages. The targeted one-off payment does not go far enough. Does the Chancellor not agree that increasing welfare benefits in line with inflation and lifting the two-child cap will tackle this problem long term, whereas what he proposes today is a sticking plaster on a gaping wound?
Rishi Sunak
The hon. Lady may not have heard what I said the last few times I answered this question. What we are doing is more generous than uprating. Uprating is worth on average just over £500; the one-off payment we are providing is £650.
Patrick Grady (Glasgow North) (SNP)
A number of Members today have drawn attention to the fact that the standing charge on prepayment meters is one of the most inequitable aspects of the entire domestic energy system, and removing it is a key ask in the letter that the Chancellor will have received from the Scottish Finance Secretary yesterday. When will he get together with the Energy Secretary, the energy companies, the regulators and anyone else concerned to bang heads together and remove this unfair charge?
Rishi Sunak
As I have said, the Energy Secretary is extensively engaged with both Ofcom and the industry to make sure that we can support people in the best way.
Jim Shannon (Strangford) (DUP)
I thank the Chancellor very much for his statement and for the substantial financial help, which is most welcome. Northern Ireland will directly benefit, as he has said, and I thank him for that. Will the Chancellor confirm that there is a mechanism that ensures the funding goes to the working poor who are on the threshold of universal credit, but do not quite make it? Will he consider realigning the threshold for universal credit with the inflation rate, which would enable those on the border of poverty to stay on their feet and not be knocked over?
Rishi Sunak
That is why, as well as the very generous support for those on means-tested benefits, we have put in place universal support to ensure that all households receive an extra £200 on top of the £200 we have announced. That will help those people, as will the discretionary fund that we have established.
Patricia Gibson (North Ayrshire and Arran) (SNP)
It is right that those companies making billions in excess profits should contribute more tax in these difficult times, and the Chancellor recognised that today by announcing a windfall tax on oil and gas companies. Disappointingly, Labour has been strangely silent on the huge profits made by other big businesses such as Amazon, even though that company’s tax-to-turnover rate is a shameful 0.37%. Can the Chancellor tell us why large corporations such as Amazon, which made billions during the pandemic, are not subject to this windfall tax? If they were, more help could be given to more people.
Rishi Sunak
I am proud that this Government worked to agree a new international taxation agreement, signed by over 130 countries, so that we can tax the profits of large digital companies more fairly. That will come into effect in the coming months and years. It is something we should all be proud of and can all get behind. I believe that the Labour party opposes the policy and would scrap that treaty.
Feryal Clark (Enfield North) (Lab)
My borough of Enfield has the 11th highest rate of child poverty in the country, and one in five people are on low pay. While the Chancellor has been dragged kicking and screaming to an inevitable outcome, families have been suffering for months. The measures today are welcome, but they need to be delivered efficiently and effectively. Can the Chancellor therefore outline what steps he will take to speed up the painfully slow council tax rebate, which is causing significant distress to my constituents?
Rishi Sunak
I know councils are working as hard as they can to get the payments to people, and we of course remain engaged with them, to help provide the support that they need to do that as fast as possible.
Madam Deputy Speaker (Dame Eleanor Laing)
I thank the Chancellor of the Exchequer for his swift answers to the questions following his statement.
Oral Answers to Questions
Rishi Sunak Excerpts(2 years, 7 months ago)
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Ruth Jones (Newport West) (Lab)
The Chancellor of the Exchequer (Rishi Sunak)
I am very proud of the record of this Government and previous Conservative-led Governments over the past decade of significantly reducing the number of people living in poverty and reducing income inequality. In February we published the levelling up White Paper, which seeks to address the very striking regional disparities our country.
Jeff Smith
The New Economics Foundation says that recent measures such as the fuel duty cut and the national insurance threshold increase will benefit the richest 5% of families twice as much as the poorest half of households. At the same time, does the Chancellor not accept that his decision to raise taxes on working people while shielding those with incomes from other sources such as a large portfolio of properties is only going to increase income inequality further?
Rishi Sunak
The hon. Gentleman is simply wrong. By raising the primary threshold to £12,500, we have ensured that the first £12,500 that anyone earns is completely free of national insurance and income tax. The independent Institute for Fiscal Studies has called it
“the best way to help low and middle earners through the tax system”.
That is what this Government are about.
Gill Furniss
The cost of living crisis is causing immense hardship for my constituents in Sheffield, Brightside and Hillsborough, many of whom have been struggling for the past 12 years of this Government’s austerity policies. Can the Chancellor look me in the eye and tell me that he is doing everything he can to prevent my constituents from falling into a never-ending cycle of poverty, particularly given that the Prime Minister admitted last week that he believes the Government have not done enough?
Rishi Sunak
The hon. Lady talks about the record of previous Governments over the past decade but, as I have mentioned to her previously, the number of people living in absolute poverty has fallen by more than 1 million since the Conservative-led Government were elected in 2010. That is a record of which we are very proud. She talks of austerity and, to bring her up to date, public spending over the course of this Parliament is growing at a record rate, both on investment and on day-to-day spending, so we can support strong investment in all the public services on which her constituents rely.
Ruth Jones
Women across the UK are the “shock absorbers of poverty,” as the Women’s Budget Group puts it. Women are cutting essentials for themselves so that their kids do not go without, and this is happening in Newport West, too. My inbox is full of emails from anxious families who are unable to pay their bills. What does the Chancellor think this says about the past 12 years of Conservative Government?
Rishi Sunak
Of course we want to be able to support those women, mothers and families who rely on us in these hard times, and that is exactly what this Government are doing. Over the past 10 years, as I said, we have reduced the number of people in poverty. We know that the best way to do that in the long term is to support people into work, which is why I am delighted to see this morning that unemployment is at its lowest level in almost half a century. The single best way to fight poverty is to have a plan for jobs, and our plan is working.
Jacob Young (Redcar) (Con)
One of the best ways to reduce economic inequality is through our plan for jobs and our freeport programme. To that end, will the Chancellor join me in welcoming the latest investment announced in Teesside’s freeport, a £150 million renewable gas facility for Circular Fuels that will create 200 jobs in construction and further jobs in the supply chain?
Rishi Sunak
My hon. Friend is absolutely right. He has been a fantastic champion for his constituents and Teesside in getting the freeport. We are now seeing the proof of that policy, with yet another announcement of more investment and more job opportunities for his constituents, which he rightly says is the best way to support them through these challenging times.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
Under this Conservative Government, people’s savings have declined by record levels. Data from the Office for Budget Responsibility shows that the amount of income households are able to save is set to fall by more than £1,000. This Tory cost of living crisis is pushing people into debt, yet one Government Minister said yesterday that, if people are struggling, they should simply work more hours and get another job. Will the Chancellor confirm that “Get on your bike” is official Conservative economic policy once again?
Rishi Sunak
There is an enormous amount to correct in the hon. Lady’s question. In aggregate, across the economy, savings increased over the past two years by more than £250 billion. Of course, that will not be distributed equally, but there is resilience. Consumer credit, on which those on lower incomes particularly rely, has also fallen by about £30 billion over the past two years. Households approach this period of difficulty in a more resilient shape than at any point in the past decade.
The comments by the Under-Secretary of State for the Home Department, my hon. Friend the Member for Redditch (Rachel Maclean), are absolutely right. It is wrong to take them out of context. This party and this Government are proud to be on the side of hard-working people. We want to support them into work, and we want to make sure that work pays. She was absolutely right to say what she said.
Matt Western (Warwick and Leamington) (Lab)
Rachael Maskell (York Central) (Lab/Co-op)
The Chancellor of the Exchequer (Rishi Sunak)
First, I wish the Financial Secretary to the Treasury, my right hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer), a very special and very happy birthday.
The Government of course appreciate that global inflationary forces are currently making life difficult for families, which is why we have brought forward, as we have heard, £22 billion-worth of support this year to help those in work and the most vulnerable in our society. We stand ready to do more as the situation evolves. That support is part of a broad plan that will grow our economy, encourage investment and create more skilled and high-wage jobs. That is this Government’s priority.
Rachael Maskell
With so much affluence in our country, poverty is a political choice—the choice of the Chancellor and his Government. In York this week, energy companies are cutting off people’s energy supply, landlords are evicting people, budgets do not balance, poor mental health is spiralling and fear is gripping people on low wages, ill and disabled people and the elderly. That is the Chancellor’s choice. Why will he not increase social security payments? Such payments should pay, not punish, and keep people safe and secure.
Rishi Sunak
The track record of this Government and previous Conservative Governments is very strong on reducing the number of people in poverty, because that is of course something that we want to achieve. On what is without question the No. 1 challenge that families currently face—energy bills—we have brought forward £9 billion-worth of support; many people in the hon. Lady’s constituency will have already benefited from £150 of that, and there is £200 more to come. Some of the actions of energy companies that the hon. Lady mentioned do not sound appropriate and I would be happy to look into the specific cases.
Rachel Reeves (Leeds West) (Lab)
At the spring statement, the Chancellor confirmed that the Conservative Government’s rise in national insurance—a tax increase on working people and the businesses that employ them—will go ahead. Since then, retail sales are falling, consumer confidence is tanking and GDP is falling. We are the only G7 country that is increasing taxes on working people in the middle of a cost of living crisis. National insurance is the wrong tax increase at the wrong time. Does the Chancellor still think that his tax rises on working people are the right approach?
Rishi Sunak
The hon. Lady fails to mention what is about to happen, which is the biggest tax cut for working people that we have seen in decades: the rise in the national insurance threshold to £12,500. That means that 30 million people in work will receive, on average, a £330 tax cut and, contrary to what she has just said, it ensures that 70% of people in work will pay less tax this year than they paid last year.
Rachel Reeves
The Chancellor expects people to thank him for increasing their taxes only then to decrease them a couple of months later. The truth is that the Chancellor should be asking those with the broadest shoulders to pay a bit more in tax—such as the North sea oil and gas companies that are making record profits—yet he chooses not to tax them. Will the Chancellor explain today why he will not close the outdated, unfair and unjustifiable tax loophole that sees 70,000 people benefit from non-dom tax status?
Rishi Sunak
The hon. Lady says that we should be asking those with the broadest shoulders to pay, but that is exactly what we are doing. The NHS and social care levy means that those with the broadest shoulders, the top 15% of earners, will pay more than half the money raised from that levy. I think that she believes that that levy should be scrapped. It is an entirely progressive way to raise money to fund the tackling of NHS backlogs, for which there is, I know, huge support in this House. The Government are keen to get on and fix the pressing challenges of this country. We will fund those things in a responsible and progressive way, and that is exactly the plan that we have put in place.
Sir Edward Leigh (Gainsborough) (Con)
Rishi Sunak
I can give my right hon. Friend that assurance. That is our priority. We started last autumn by cutting the tax rate for those on the lowest incomes and universal credit. We carried that on in the spring statement by delivering a tax cut for those on lower-middle incomes by raising the primary threshold, and our priority is to keep cutting taxes for those in work, including by cutting income tax, as soon as the public finances allow.
Alison Thewliss (Glasgow Central) (SNP)
Inflation is running out of control, growth is flatlining, and food and energy costs are spiralling. The Governor of the Bank of England yesterday was warning of “apocalyptic” food prices. James Withers of Scotland Food & Drink says that Brexit has made nothing better and a number of things worse. People and businesses have heard absolutely nothing from this Chancellor today on how he will tackle this urgent cost of living crisis—nothing at all. Will he bring forward an emergency Budget without further delay, as the British Chambers of Commerce are asking?
Rishi Sunak
The hon. Lady talks about Brexit. We have already heard about the difference that Brexit is making, with a freeport in Teesside, which, because of Brexit, we have been able to create—and not just there, but in Leith, Immingham, Southampton and other places too. As we have heard today, those innovations are bringing jobs and investment to parts of our country that need to see it. That is what this Government promised to do, and that is what this Government are delivering.
Ms Nusrat Ghani (Wealden) (Con)
Hannah Bardell (Livingston) (SNP)
Rishi Sunak
I urge the British people to judge me by my actions. Over the past two years, the record of this Conservative Government stands for itself. We were there to help this country through the crisis and we are there to help them today.
Mel Stride (Central Devon) (Con)
Naturally, there has been criticism of the Bank of England, given the level of inflation and its inflation target, but among that criticism there have been reports that some in government, including perhaps one member of the Cabinet, have been suggesting that the independence of the Bank of England should be removed. Does my right hon. Friend agree that it is essential that our central bank is independent in order to maintain the credibility and integrity of our monetary policy? Will he give a categorical assurance to the House that there are no plans of any kind to restrain the independence of our central bank?
Rishi Sunak
I thank my right hon. Friend the Chair of the Select Committee for his important intervention. I agree with him wholeheartedly. While we face challenges at the moment, the record of 25 years of central bank independence speaks for itself, with an average inflation rate of exactly 2%. I know all colleagues will want to make sure that we return to that as swiftly as possible, and I can assure him that that is both my and the Governor’s ambition.
Mr Virendra Sharma (Ealing, Southall) (Lab)
Alan Brown (Kilmarnock and Loudoun) (SNP)
Rishi Sunak
Of course the Government recognise that energy bills are the single biggest challenge households face. That is why we have provided £9 billion-worth of support, including £150 for English households in the most recent month, with £200 more in support to come later this year.
Saqib Bhatti (Meriden) (Con)
I believe the Conservatives are and ought to be the party of hard-working families. According to a report released yesterday by the Centre for Policy Studies, reducing the cost of childcare can increase GDP by 10% and increase access to opportunities for women in the workforce. Does my right hon. Friend the Chancellor agree that helping hard-working families with childcare costs is good for the economy and that it is the Conservative thing to do?
Mr Richard Holden (North West Durham) (Con)
Can my right hon. Friend the Chancellor confirm that a worker working full time, or 40 hours a week, on the living wage is now £1,700 a year better off in real terms than they were in 2010 and that, after July, that will rise to almost £2,000, with everybody earning less than £36,000 a year better off under this Conservative Government this year?
Rishi Sunak
My hon. Friend is absolutely right, and I thank him for his support in championing policies that support his hard-working constituents. This Government will always be on the side of people on lower and middle incomes who are working hard to provide a better life for their families, and we will keep delivering for them.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Rishi Sunak
Sadly, nothing we can do from this Dispatch Box can change global oil prices, but we can reduce the taxes that we are responsible for. That tax cut, together with the freeze, is worth, this year, about £100 for a typical family driver, £200 or more for a van driver, and almost £1,500 for an HGV driver.
Helen Morgan (North Shropshire) (LD)
Rishi Sunak
Whether it is expansion of the school breakfast club programme, the holiday activities and food programme or healthy start vouchers, this Government are supporting families in meeting the costs of food, particularly at this difficult time. The hon. Gentleman rightly talks about children growing up in poverty. The best way to support those children is to ensure that they do not grow up in a household where no one is working, and I am proud that, thanks to the actions of Conservative Governments, half a million fewer children are now growing up in a workless household.
Stella Creasy (Walthamstow) (Lab/Co-op)
One group of companies doing well out of the cost of living crisis is the buy now, pay later lenders, with Klarna now valued higher than Barclays or Lloyds. One in 12 of their customers are using buy now, pay later credit to pay for toiletries and basic food products. Will the Chancellor, who was boasting about our consumer credit profile earlier, name the date when our constituents can finally make good on the promise that was made in this House over 18 months ago to give people protection from these legal loan sharks and access to the Financial Ombudsman Service?
Nia Griffith (Llanelli) (Lab)
This Government have completely failed on growth in the economy, with the IMF, taking into account all the current Government proposals, currently forecasting that the UK will have the slowest growth in the G7 this year. The Minister will know that putting money into the pockets of the least well-off not only relieves their hardship but puts it into the local economy as they have to spend it, of necessity, back into the local economy, thus stimulating growth. Instead of choking off growth through the £20 universal credit cut, the national insurance hike and the refusal to use a windfall to relieve the hardship of these families, what new, additional measures do the Government propose to help hard-pressed families and to improve that IMF forecast on growth?
Rishi Sunak
The hon. Lady cherry-picks the statistics. Last year we were the fastest-growing economy in the G7 and this year the second fastest. After the other countries have caught us up next year, we will return to being the second-fastest and then the fastest-growing economy. There is more come from this Government to support growth. In the autumn we will cut taxes on business investment and innovation, which we all know is the best way to drive up productivity and growth.
Andrew Gwynne (Denton and Reddish) (Lab)
Ministers spoke earlier about using infrastructure to level up, and they are absolutely right—we need to link local communities to where the jobs are, so transport matters. Why, then, is there a lack of joined-up government? The Treasury is paying billions towards High Speed 2 coming to Manchester, yet the Bill before Parliament will sever the Metrolink line through Audenshaw in my constituency to Manchester, meaning that the tram will not be able to run for two years. That is not levelling up, is it?
Tackling Short-term and Long-term Cost of Living Increases
Rishi Sunak Excerpts(2 years, 7 months ago)
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The Chancellor of the Exchequer (Rishi Sunak)
I am proud to speak today in support of a Queen’s Speech that will both ease the cost of living with billions of pounds of support for families and grow the economy, creating more jobs, more investment and higher wages.
The International Monetary Fund, the OECD and the World Bank have all warned that high inflation is the most acute challenge facing not just the UK, but the global economy. We are not alone in facing these challenges: covid has disrupted supply chains; Putin’s invasion of Ukraine has exacerbated the shock in energy prices; and businesses are facing shortages. The causes are indeed global, but, of course, the consequences are being felt here at home. Families up and down the country are being hit hard by the rise in prices of fuel, of food and of heating. I cannot say to people that this will be easy; the next few months will be difficult. There is no measure any Government can take and no law we can pass that can make these global forces disappear overnight. No honest Chancellor could stand here and promise that prices will not rise further, or that the Government can cover every extra pound on people’s bills.
Several hon. Members rose—
Rishi Sunak
I will give way in a second.
To suggest that no help is available, as some have said today, is both misleading and irresponsible.
Stephen Timms (East Ham) (Lab)
The other day, the Chancellor said that he could not increase benefits because of IT problems. At the start of the pandemic, quite rightly, he increased universal credit by £20 a week. Will he do that again?
Rishi Sunak
Given the right hon. Gentleman’s experience, he will know, perhaps better than me, that there are multiple different benefits on multiple different systems, and while universal credit does have the flexibility of being changed at different times—a policy, by the way, that the Labour party opposed at every step of the way—the remainder of benefits and pensions cannot be uprated mid-year. I am sure that my right hon. Friend the Secretary of State for Work and Pensions will speak to that later.
The Secretary of State for Work and Pensions (Dr Thérèse Coffey)
indicated assent.
Rishi Sunak
None the less, I am glad to see that the right hon. Gentleman supports universal credit. That is one thing that the Government are proud of introducing. The benefit can respond in a crisis, as it so admirably did.
John Cryer (Leyton and Wanstead) (Lab)
The Chancellor has just admitted that he could increase universal credit by £20, so why does he not do it?
Rishi Sunak
Because we want to make sure that we get support to everyone in a way that suits them. What we did do—and we heard this from the right hon. Member for Doncaster North (Edward Miliband) when he gave a case study on universal credit—is cut the universal credit taper by the biggest amount ever. That was the biggest tax cut that we have seen for people on low incomes, which is in contrast to the cherrypicked example that we heard from right hon. Gentleman. What does that mean for a single mother on universal credit, working on the national living wage, renting, and with two children? It means that that mum will be £1,600 a year better off this year. That is what this Government are doing. Help is there, and anyone seeking to pretend otherwise is simply causing more worry and more anxiety.
Robert Halfon (Harlow) (Con)
There is no recognition from Labour Members of the £22 billion that the Government put in to help with the cost of living, particularly the 5p cut in fuel duty. However, I do have one ask of my right hon. Friend. The oil companies are not passing the cuts to the pumps. They take ages to reduce the prices when the international oil price falls, but oil bosses are earning multi-million pound salaries and getting multi-million pound bonuses. They are, in essence, the new oligarchs. I urge him to consider both a windfall tax on the oil companies, which we can then use to cut taxes for the lower paid or to cut energy bills, and a pump-watch monitor to make sure that there is fair competition and that consumers get a fair deal at the pumps. None the less, I genuinely recognise all the work that he has done thus far to cut the cost of living.
Rishi Sunak
I thank my right hon. Friend for his advice and support, and I will come on to both of his points momentarily. He is right to remind the House that so far we have provided £22 billion of direct support. That is not a trivial figure; it is £22 billion of support to help families up and down our country at a time of challenge. We have taken action, as we heard, to cut people’s bills, starting with fuel duty—I commend him for his campaigns on that. It has been cut by 5p a litre, which is worth £100 this year together with the freeze, and council tax, cut by £150.
What the right hon. Member for Doncaster North did not mention was that that £150 of support, which, as we heard from my right hon. Friend the Member for Harlow (Robert Halfon), has made a huge difference to families, came faster than any support the Labour party was offering in its proposal, and it went to a far broader group of people than their proposal, because we wanted to support those on middle incomes as well.
Rishi Sunak
VAT would have been worth about, I think, £8 a month at the time. This is £150 in people’s bank accounts in April.
We also cut the taper rate on universal credit, giving an extra £1,000 to the average household. The warm home discount increased to £150, the national living wage increased, giving low-paid workers a pay rise of £1,000, and we will go further.
David Linden (Glasgow East) (SNP)
I want to take the Chancellor back to what he said earlier in his speech about the Government’s acting quickly on the covid crisis. Does he recognise that many of our constituents are in a crisis now? I know he is installing a new swimming pool in the house he lives in, but I can tell him that people in Glasgow East are struggling and his Government need to do more.
Rishi Sunak
This Government have always acted to protect this country at times of challenge; we have done so through the past two years and we continue to do so now. As has been said, £9 billion of support on energy bills was announced in February at the same time as the price cap was increased, and it covered 50% of the rise in bills—accepting and being honest with the House, as we discussed at the time, that no Government could cover every pound of an increase when we are in a situation with global inflationary forces, and that it would be both irresponsible and misleading to pretend to the British people that that was possible.
But we are going further: in October, a further discount on energy bills worth £200 and, in just a few weeks’ time, a massive tax cut for workers when the national insurance threshold is increased to £12,500. That is a £6 billion tax cut for working people, the biggest increase in a personal tax threshold ever, and it will mean that everyone in this country can earn £12,500 without paying a penny of income tax or national insurance. That means, in contrast with what we have heard, that 70% of working people will pay less tax this year than they did last year.
Taken together, all the measures I have just mentioned equate to a £22 billion plan to help cut costs for families and help people with the cost of living. Of course, as the situation evolves, our response will also evolve. I have always been clear that we stand ready to do more.
That brings me to the topic of a windfall tax. Unlike the Labour party, we Conservatives do not believe that windfall taxes are the simple and easy answer to every problem. However, we are pragmatic, and we want to see our energy companies, which have made extraordinary profits at a time of acutely elevated prices, investing those profits back into British jobs, growth and energy security. I have made it clear and said repeatedly that, if that does not happen soon and at significant scale, no option is off the table.
Global economic forces are indeed hitting the British people hard, and that is why the Government are stepping in to help. Ultimately, however, over the long term we on the Conservative side know that the best way to raise living standards is to grow the economy. That is why our economic plan and this Queen’s Speech will create more jobs, more investment and, crucially, higher wages.
During the pandemic, we provided billions in support not only to the economy, but specifically to businesses. Because of schemes such as furlough we were able to keep millions and millions of people in work, and the success of our plan for jobs is clear. As we heard from my right hon. Friend the Member for Forest of Dean (Mr Harper), unemployment right now is the lowest it has been in almost half a century, job vacancies are the highest they have ever been, and total pay is rising in real terms and is more than 4% higher than before the pandemic, even adjusted for the inflation we are seeing.
That does not happen by accident. It is the result of a responsible Conservative Government delivering a stronger economy—an economy that grew faster last year than any of our competitors. That strong recovery is making a difference to people’s finances. Taken together, the combination of policy measures the Government have announced and the growth in the economy offset around half the shock to incomes caused by higher global energy and goods prices. Half of that shock has been offset by the result of our actions to grow the economy and support people directly.
Of course we need to do more to create further economic growth. That is why this Queen’s Speech includes measures to do exactly that.
Dame Angela Eagle (Wallasey) (Lab)
Given that the right hon. Gentleman was just talking about growth in the economy, he will be aware that the Governor of the Bank of England and the Monetary Policy Committee told the Treasury Committee yesterday that growth would be negative in the fourth quarter of this year. Growth is slowing, unemployment is rising and inflation is soaring—is that not correct?
Rishi Sunak
I think the hon. Lady said unemployment is rising. No—it just fell this morning to the lowest level in almost half a century. I will come on to our growth figures in just a second, but we have had a strong recovery and are forecast to continue growing strongly relative to peers.
We do need to do more, and that is why the Queen’s Speech includes measures to boost our national infrastructure, to level up, to back financial services—one of our biggest and most successful sectors, employing millions of people across the country—to cut red tape, to use our new Brexit freedoms, to back British businesses, to reform higher education and to strengthen our energy security. We on the Conservative side know that over the longer term, the best way to create growth is to have an economy where businesses can invest more, train more and innovate more.
Dan Carden (Liverpool, Walton) (Lab)
While the Chancellor is still considering a windfall tax, I want to tell him about one constituent of mine who got in touch: a 62-year-old woman in Walton, who decided to disconnect from British Gas for fear of a bill coming through her door in a few months’ time.
Rishi Sunak
I am very sorry to hear about the circumstances of the individual concerned. I would be happy to talk to her directly, if that would help, but I hope the hon. Gentleman, in his role, can explain to her the support that is in place to support families such as hers, whether that is direct support with her energy bills, the £150, the fact that her national living wage may well be increased depending on her situation or, as my right hon. Friend the Secretary of State for Work and Pensions reminds me, the fact that she can talk to her local council to access the household support fund that is being doubled to £1 billion to provide direct support to those who are most vulnerable.
Several hon. Members rose—
Rishi Sunak
I am now going to make some progress. Our plan is to build the economy of the future. That is why, this autumn, we will cut taxes on capital, on people and on ideas to drive up growth and support businesses to do so.
While we are talking about growth, we have heard a lot during these debates—I think the right hon. Member for Doncaster North also mentioned it—about the Labour growth that we experienced between 1997 and 2010. It was obviously a very long time ago that we last had a Labour Government, so let me remind the House of the facts.
Under the Labour Government, the UK’s cumulative economic growth was third in the G7. Under this Government, despite having lived through the worst recession in more than 300 years, our cumulative growth is also third in the G7. Let us also remember that when the Opposition last arrived in office, unemployment was 7%. When they left, 13 years later, it was of course higher at 8%. New figures out this morning, as we have heard, show that today, the UK’s unemployment rate is less than half that, at 3.7%, the lowest in almost half a century.
The story is the same on public finances. The deficit in 1997 was 2% of GDP. By 2010, it was nearly 10%, and £1 in every £4 the Government spent was borrowed. There was, as we heard, no money left.
Richard Fuller (North East Bedfordshire) (Con)
May I add to what the Chancellor says that under this Conservative Government we introduced the living wage, which has increased wages for the poorest in our country at a higher rate than the last Labour Government ever had the courage to do, and we now have the lowest unemployment rate for 50 years?
Rishi Sunak
My hon. Friend is absolutely right. This year’s increase in the national living wage is worth £1,000 to someone working full-time who is on the national living wage. That will benefit millions of people, particularly those on a low income. That is our priority and those are our values.
The approach to borrowing that I have described is not the approach of this responsible Conservative Government. Today, despite having spent hundreds of billions throughout the pandemic, we are providing the highest sustained level of public sector investment in decades and investing record amounts in public services such as the NHS. This Government are on track to have borrowing low and debt falling again. That is our record: robust growth, more jobs and being responsible with the country’s finances.
History reminds us that, at times when we face severe supply problems, an unconstrained fiscal stimulus risks making the problem worse, pushing up prices still further and ingraining expectations of higher inflation—a vicious cycle leading inexorably to even higher interest rates and more pain for tens of millions of mortgage holders and small businesses. Let us be in no doubt, simply trying to borrow and spend our way out of this situation is the wrong approach; those paying the highest price would be the poorest in our society. Instead, the Government are taking a careful, deliberate approach. We will act to cut costs for those people without making the situation worse. We will continue to back people who work hard, as we always have, and we will do more to support the most vulnerable—and, unlike others, we will not simply borrow our way out.
So yes, we are helping families by cutting their costs, and it is irresponsible to suggest otherwise. That support will always be part of a broader plan to grow the economy, encourage investment and create more high-skilled, high-wage jobs, all built on the foundation of strong public finances. That is our economic plan. We are providing £22 billion-worth of support to help families with the cost of living. We are creating more jobs, more investment and higher wages. That is what this Queen’s Speech is all about, and I commend it to the House.
Several hon. Members rose—
Contingent Liability Notification
Rishi Sunak Excerpts(2 years, 7 months ago)
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The Chancellor of the Exchequer (Rishi Sunak)
The Monetary Policy Committee (MPC) of the Bank of England (“the Bank”) decided at its meeting ending on 3 February 2022 to reduce the stocks of UK Government bonds and sterling non-financial investment-grade corporate bonds held in the asset purchase facility (APF) by ceasing to reinvest maturing securities. The MPC also agreed that the Bank of England should initiate a programme of corporate bond sales to be completed no earlier than towards the end of 2023 that should unwind fully the stock of corporate bond purchases.
In response to this decision, the Governor and I jointly agreed that, as the size of APF holdings reduces, the authorised maximum size for asset purchases should be adjusted to reflect the size of the portfolio every six months.
Since 3 February 2022, the total stock of purchased assets of the APF has fallen from £895 billion to £866.6 billion. Following this, and in line with the approach agreed with the Governor in February 2022, the authorised maximum total size of asset purchases within the APF has been reduced from £895 billion to £866.6 billion.
The risk control framework previously agreed with the Bank will remain in place, and HM Treasury will continue to monitor risks to public funds from the APF through regular risk oversight meetings and enhanced information sharing with the Bank.
There will continue to be an opportunity for HM Treasury to provide views to the MPC on the design of the schemes within the APF, as they affect the Government’s broader economic objectives and may pose risks to the Exchequer.
The Government will continue to indemnify the Bank, the APF and its directors from any losses arising out of, or in connection with, the facility. If the liability is called, provision for any payment will be sought through the normal supply procedure.
A full departmental minute has been laid in the House of Commons providing more detail on this contingent liability.
[HCWS21]
Financial Statement
Rishi Sunak Excerpts(2 years, 8 months ago)
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The Chancellor of the Exchequer (Rishi Sunak)
As I stand here, men, women and children are huddled in basements across Ukraine seeking protection. Soldiers and citizens alike have taken up arms to defend their land and families. The sorrow we feel for their suffering, and the admiration for their bravery, is only matched by the gratitude we feel for the security in which we live—and what underpins that security is the strength of our economy. It gives us the ability to fund the armed forces we need to maintain our liberty, the resources we need to support our allies, the power to impose sanctions which cause severe economic costs, and the flexibility to support businesses and individuals through crises as they emerge. We should be in no doubt: behind Putin’s invasion is a dangerous calculation that democracies are divided, politically weak and economically insecure, and incapable of making tough long-term decisions to strengthen our economies. This calculation is mistaken. What the authoritarian mind perceives as division we know are the passionate disagreements at the heart of our living, breathing democracy. What they see as chaos we know is the freedom to be dynamic and innovative. What they call the inherent weakness of open societies and free economies we know is the source of our strength.
We will confront this challenge to our values not just in the arms and resources we send to Ukraine, but in strengthening our economy here at home. When I talk about security, yes, I mean responding to the war in Ukraine, but I also mean the security of a faster growing economy, the security of more resilient public finances, and security for working families as we help with the cost of living.
Today’s statement builds a stronger, more secure economy for the United Kingdom. We have a moral responsibility to use our economic strength to support Ukraine and work with international partners to impose severe costs on Putin’s regime. We are: supplying military aid to help Ukraine defend its borders; providing around £400 million in economic and humanitarian aid, as well as up to $0.5 billion in multilateral financial guarantees; launching the new Homes for Ukraine scheme to make sure that those forced to flee have a route to safety here in the UK; and imposing sanctions of unprecedented scale and scope. We have: sanctioned more than 1,000 individuals, entities and subsidiaries; frozen the assets of major Russian banks; imposed punitive tariffs on key products; restricted Russia’s access to sterling clearing, to insurance, to the UK’s capital markets and to SWIFT; and we have targeted the Russian central bank, too.
Be in no doubt, these sanctions, co-ordinated with our allies, are working. The Russian rouble plummeted to record lows. The Moscow stock exchange has been largely suspended for a month, and the Central Bank of Russia has been forced to more than double interest rates to 20%. We warned that an aggressive, unprovoked invasion would be met with severe economic costs, and it has. I am proud to say, as the whole House will say: we stand with Ukraine.
But the actions we have taken to sanction Putin’s regime are not cost free for us at home. The invasion of Ukraine presents a risk to our recovery, as it does to countries around the world. We came into this crisis with our economy growing faster than expected, with the UK having the highest growth in the G7 last year. But the Office for Budget Responsibility has said specifically:
“There is unusually high uncertainty around the outlook”.
It is too early to know the full impact of the Ukraine war on the UK economy, but its initial view, combined with high global inflation and continuing supply chain pressures, means that the OBR now forecasts growth this year of 3.8%. The OBR then expects the economy to grow by 1.8% in 2023, and 2.1%, 1.8% and 1.7% in the following three years. The House will take comfort that the lower growth outlook has not affected our strong jobs performance. Unemployment is now forecast to be lower in every year of the forecast. It is already at 3.9%—back to the low levels we saw before the pandemic.
But the war’s most significant impact domestically is on the cost of living. Covid and global factors meant goods and energy prices were already high. Statistics published this morning show that inflation in February was 6.2%. That is lower than the US and broadly in line with the euro area. Disruptions to global supply chains and energy markets, combined with the economic response to Putin’s aggression, mean that the OBR expects it to rise further, averaging 7.4% this year.
As I said last month, the Government will support the British people as they deal with the rising costs of energy. People should know that we will stand by them, as we have throughout the last two years. That is why we have announced a £9 billion plan to help around 28 million households pay around half the April increase in the energy price cap. People should be reassured that the energy price cap will protect their energy bills between now and the autumn, but I want to help people now, so I am announcing three immediate measures.
First, I am going to help motorists. Today I can announce that for only the second time in 20 years, fuel duty will be cut. Not by 1p, not even by 2p, but by 5p per litre—the biggest cut to all fuel duty rates ever. While some have called for the cut to last until August, I have decided it will be in place until March next year—a full 12 months. Together with the freeze, it is a tax cut this year for hard-working families and businesses worth over £5 billion, and it will take effect from 6 pm tonight.
Secondly, as energy costs rise, we know that energy efficiency will make a big difference to bills, but if homeowners want to install energy-saving materials, at the moment only some items qualify for 5% VAT relief and there are complex rules about who is eligible. The relief used to be more generous but from 2019 the European Court of Justice required us to restrict its eligibility.
Thanks to Brexit, we are no longer constrained by EU law, so I can announce that for the next five years, homeowners having materials such as solar panels, heat pumps and insulation installed will no longer pay 5% VAT; they will pay zero. We will also reverse the EU’s decision to take wind and water turbines out of scope and zero rate them as well—and we will abolish all the red tape imposed on us by the EU. A family having a solar panel set installed will see tax savings worth £1,000 and savings on their energy bill of over £300 per year.
This policy highlights the deficiencies in the Northern Ireland protocol. We will not immediately be able to apply it to Northern Ireland, but we will be raising it with the Commission as a matter of urgency, and I want to reassure Members from Northern Ireland that the Executive will receive a Barnett share of the value of the relief until it can be introduced UK-wide. The Prime Minister will bring forward further measures to reinforce our long-term energy security in the coming weeks.
Finally, I want to do more to help our most vulnerable households with rising costs. They need targeted support, so I am doubling the household support fund to £1 billion with £500 million of new funding. Local authorities are best placed to help those in need in their local areas, and they will receive this funding from April.
We can only afford to provide this extra support because of our stronger economy and the tough but responsible decisions we have taken to rebuild our fiscal resilience. Today’s forecasts confirm that even after the measures I am announcing today, we are meeting all our fiscal rules. Underlying debt is expected to fall steadily from 83.5% of GDP in 2022-23 to 79.8% in 2026-27. Borrowing as a percentage of GDP is 5.4% this year, 3.9% next year, and then 1.9%, 1.3%, 1.2% and 1.1% in the following years.
At a time when the OBR has said that our fiscal headroom could be
“wiped out by relatively small changes to the economic outlook,”
it is right that the central fiscal judgement I am making today is to meet our fiscal rules with a margin of safety. The OBR has not accounted for the full impacts of the war in Ukraine, and we should be prepared for the economy and public finances to worsen, potentially significantly.
The cost of borrowing is continuing to rise. In the next financial year, we are forecast to spend £83 billion on debt interest—the highest on record and almost four times the amount we spent last year. That is why we have already taken difficult decisions with the public finances, and that is why we will continue to weigh carefully calls for additional public spending. More borrowing is not cost or risk free. I said it last autumn, and I say it again today: borrowing down; debt down—only the Conservatives can be trusted with taxpayers’ money.
Our response to the immediate crisis in Ukraine has been unwavering, but we must be equally bold in response to the deeper and more fundamental challenge Putin poses to our values. We must show the world that freedom and democracy remain the best route to peace, prosperity and happiness. We will do so by strengthening our economy here at home. To that end, we are helping families with the cost of living, creating the conditions for accelerated growth and productivity, and making sure that the proceeds of growth are shared fairly. That is not the work of any one statement, but it does begin today, and with one of our most important levers: the tax system.
I told the House last autumn that my overarching ambition was to reduce taxes by the end of this Parliament, and we will do so in a way that is responsible and sustainable. Today, I am publishing a tax plan. We will take a principled approach to cutting taxes: maintaining space against our fiscal rules, as I have done today; continuing to be disciplined, with the first call on any extra resources being lower taxes, not higher spending; and, of course, carefully considering the broader macroeconomic outlook.
With those principles in mind, our new tax plan will build a stronger economy by reducing and reforming taxes over this Parliament, in three ways. First, we will help families with the cost of living; secondly, we will create the conditions for higher growth; and thirdly, we will share the proceeds of growth fairly, ensuring people are left with more of their own money. Let me take each in turn.
There is now a dedicated funding source for the country’s top priority, the NHS and social care, providing funding over the long term as demand grows, with every penny going straight to health and care. If it goes, then so does the funding, and that funding is needed now, especially as my right hon. Friend the Health Secretary’s plans to reform healthcare will ensure every pound of taxpayers’ money is well spent. When I said the Conservatives were the party of public services—the party of the NHS—I did not just mean when it was easy; it is a total commitment.
So it is right that the health and care levy stays, but a long-term funding solution for the NHS and social care is not incompatible with reducing taxes on working families. Over the last decade, it has been a Conservative mission to promote tax cuts for working people and simplify the system. That is why Conservative-led Governments raised the income tax personal allowance from £6,500 in 2010 to the new level of £12,570. But the equivalent thresholds in national insurance, which define how much people can earn NICs-free, are still around £3,000 less.
The Prime Minister pledged in the 2019 election that we would increase those thresholds. We made a big step towards that goal in my first Budget in 2020, increasing the national insurance threshold to £9,500. Today, we take the next step. Our current plan is to increase the NICs threshold this year by £300, but I am not going to do that. I am going to increase it by the full £3,000, delivering our promise to fully equalise the NICs and income tax thresholds—and not incrementally over many years, but in one go this year. From this July, people will be able to earn £12,570 a year without paying a single penny of income tax or national insurance.
That is a £6 billion personal tax cut for 30 million people across the United Kingdom, a tax cut for employees worth over £330 a year, the largest increase in a basic rate threshold ever, and the largest single personal tax cut in a decade. The Institute for Fiscal Studies has called it
“the best way to help low and middle earners through the tax system”.
It creates what the Centre for Policy Studies has called a “universal working income”. It is a tax cut that rewards work, and around 70% of all workers will have their taxes cut by more than the amount they will pay through the new levy, once again showing that it is this Conservative Government delivering for hard-working families and helping with the cost of living.
The first part of our tax plan for a stronger economy is to support families with the cost of living, but as I set out in last month’s Mais lecture, to lift our growth and productivity, we need the private sector to train more, invest more and innovate more. People, capital, ideas: that is how we will create a new culture of enterprise—the second part of our tax plan. The plan sets out tax-cutting options on business investment and innovation, with final decisions to be announced in the autumn Budget, but these are significant and complex questions, so we will work with businesses over the summer to get the answers right. Let me explain to the House the direction of travel.
First, on people, we lag behind international peers on adult technical skills. Just 18% of 25 to 64-year-olds hold vocational qualifications, which is a third lower than the OECD average, and UK employers spend just half the European average on training their employees. We will consider whether the current tax system, including the operation of the apprenticeship levy, is doing enough to incentivise businesses to invest in the right kinds of training.
Secondly, on ideas, over the last 50 years, innovation drove around half the UK’s productivity growth, but since the financial crisis, the rate of increase has slowed more than in other countries. Our lower rate of innovation explains almost all our productivity gap with the United States. Right now, we know that the amount that businesses spend on research and development as a percentage of GDP is less than half the OECD average, and that is despite us spending more on tax reliefs than almost every other country. Something is not working, so we will reform R&D tax credits so that they are effective and better value for money; we will expand the generosity of the reliefs so that they include data, cloud computing and pure maths; and we will consider, in the autumn, whether to make the R&D expenditure credit more generous.
Thirdly, on capital, weak private sector investment is a long-standing cause of our productivity gap internationally: capital investment by UK businesses is considerably lower than the OECD average of 14%, and it accounts for fully half our productivity gap with France and Germany. Once the super deduction ends next year, our overall tax treatment for capital investment will be far less generous than that of other advanced economies. We are going to fix that. In the autumn Budget, we will cut the tax rates on business investment, and I look forward to discussing the best ways to do that with businesses. People, capital, ideas—three priorities for business tax cuts this autumn.
But I want to help smaller businesses right now, so let me remind the House of our plan. Our business rates discount will take effect in April for retail, hospitality and leisure businesses. They will get a 50% discount on their business rates bill, up to £110,000. A typical pub will save £5,000. That is a tax cut for hundreds of thousands of small businesses, worth £1.7 billion, taking effect in just a week’s time. Our Help to Grow Management scheme offers businesses mini-MBAs, 90% funded by Government—a benefit worth several thousand pounds—and Help to Grow Digital gives businesses a 50% discount on buying new software, up to £5,000. We have also increased the annual investment allowance to £1 million, so that small and medium-sized businesses will feel the benefit of full expensing.
I want to respond to the specific calls from small businesses with one further announcement today. The employment allowance cuts small businesses’ tax bills, making it cheaper to employ workers. In my first Budget two years ago, I increased that allowance. Today, I am going further. From April, the employment allowance will increase to £5,000. That is a new tax cut worth up to £1,000 for half a million small businesses, starting in just two weeks’ time. Future tax cuts on business investment and innovation; a business rates discount worth £1.7 billion; Help to Grow schemes worth thousands of pounds per business; an annual investment allowance worth up to £1 million; and a new tax cut on the costs of employment, worth £1,000 per company—once again, it is this Conservative Government delivering for British business.
The tax plan I have announced today will help people and businesses to deal with rising costs, and will help raise the future growth rate of this country, but we want the proceeds of growth shared fairly—the third objective of our tax plan. The knowledge that people can keep more of what they earn is a powerful incentive for people to work hard. It means greater economic security, and we know that individuals spend their money better than Governments do. We have already announced today the equalisation of personal tax thresholds, giving over 30 million workers a tax cut worth over £330, and over time I want to go further; but tax cuts must be paid for, must be prioritised, and must fit the economic circumstances of the time. A clear goal for Conservative Chancellors, and even some Labour ones, has been to cut income tax. The fact that this has happened only twice in 20 years tells us how hard it is to do. Covid and the war in Ukraine have only added to the difficulty of achieving this by the end of this Parliament. I am sure that all Members of the House recognise and understand those challenges. It would clearly be irresponsible to meet that ambition this year, yet I refuse to let it wither and drift.
By 2024, the Office for Budget Responsibility currently expects inflation to be back under control, debt to be falling sustainably, and the economy to be growing. Our fiscal rules are met with a clear margin of safety, so my final announcement today is this: I can confirm that before the end of this Parliament, in 2024, for the first time in 16 years, the basic rate of income tax will be cut from 20p to 19p in the pound—a tax cut for workers, for pensioners, and for savers, and a £5 billion tax cut for 30 million people. Let me be clear with the House: it is fully costed and fully paid for in the plans announced today. Last year, I told the House that I would cut taxes for hard-working families, but I would do so in a responsible and sustainable way, and today I am delivering on that promise.
Cutting taxes is not easy. it requires hard work, prioritisation, and willingness to make difficult and often unpopular arguments elsewhere. It is only because this Government have been prepared to make difficult but responsible choices in order to fix our public finances that I can stand here and tell this House not only that taxes are being cut, but that debt is also falling while public spending is increasing. That does not happen by accident. We can deliver for the British people today and into the future because, unlike the Labour party, we have a plan—a plan that reforms and improves public services, a plan to grow our economy, a plan to level up across the United Kingdom, a plan that helps families with the cost of living and, yes, a tax plan that cuts taxes for working families by over £330. It cuts taxes on fuel by 5p per litre. It cuts taxes on business and, yes, for the for the first time in a long time, it cuts income tax. Let me end by simply saying this: my tax plan delivers the biggest net cut to personal taxes in over a quarter of a century, and I commend it to the House.
Rachel Reeves (Leeds West) (Lab)
Thank you, Mr Speaker. Today was the day that the Chancellor could have put a windfall tax on oil and gas producers to provide real help for families, but he did not. Today was the day he could have set out a proper plan to support businesses and create good jobs, but he did not. Today was the day that he could properly have scrapped his national insurance hike, but he did not. Labour said it was the wrong tax at the wrong time, and the wrong choice; and today the Chancellor has finally admitted that he got that one wrong. Inflation is at its highest level for 30 years, and rising. Energy prices are at record highs, and people are worried sick. For all his words, it is clear that the Chancellor does not understand the scale of the challenge. He talks about providing security for working families, but his choices are making the cost of living crisis worse, not better.
The situation following Putin’s criminal assault on Ukraine remains gravely serious. Just one month after the invasion, so much has changed, and there will be repercussions for years to come. The Chancellor has today failed to explain why he chose to sign off on a reduction in our country’s armed forces last October. Will he confirm whether the Government’s target Army size is still being reduced by 10,000 troops? I say this to the Chancellor: Labour will support whatever is needed on defence and security, in order to keep our country safe.
The tremors following Putin’s aggression will impact Britain, including economically, but the cost of living crisis predates Putin’s attack on Ukraine. In October, inflation was already forecast to be double the Bank of England’s target, yet the Prime Minister said that fears of inflation were unfounded. Today we learn that inflation has reached 6.2%, and it is expected to go higher in the coming months. People are rightly looking to their Government to help them weather this storm. Labour will support sensible measures to ease the pressure, but what the Chancellor has announced today says everything we need to know about his priorities.
The cost of living crisis is hitting people particularly hard because incomes have been squeezed during the past 12 years of Conservative Governments. Ordinary families, disabled people, and pensioners are facing difficult choices. Mums are skipping meals so that their children do not. Families are struggling to buy new school shoes and uniforms for their children. Older people are hesitating to put the heating on, because they are worried about the cost.
At the weekend, the Chancellor was asked about fuel poverty, and he did not even know the numbers. That is shameful, because when Martin Lewis predicts that 10 million people could be pushed into fuel poverty, the Chancellor should sit up and listen. We know that pensions and social security will not keep up with inflation, and pensioners and those on social security will be getting a real-terms cut to their income. What analysis has the Chancellor done on the impact of benefits being uprated by less than inflation? How many more children and pensioners will drift into poverty because of the choices of this Government?
Who does the Chancellor prioritise? He continues to defend the record profits of oil and gas producers, who themselves admit that they have more money than they know what to do with. BP describes this crisis as a “cash machine” for it, but it is British people who are paying out. It is deeply regrettable that the SNP has joined the Tories in wanting to shield oil and gas producers from Labour’s progressive measures. When I set out Labour’s plans for a windfall tax in January, we estimated that it would have raised £1.2 billion. Because of the continued rise in global oil and gas prices, it would today raise more than £3 billion. That money could be used to help families, pensioners and businesses, with a cut to VAT being a real Brexit dividend that would help working families and pensioners across our country. A targeted warm home discount would see families and pensioners on the lowest and modest incomes supported by £600.
Today the Chancellor comes along, after 12 years of failure on energy efficiency, and announces a VAT cut on building materials. That is wholly inadequate. A proper energy efficient scheme, such as that set out by Labour, could cut bills by £400 for people from next year. The silence from the Chancellor about our energy intensive manufacturing industries is appalling. At this time of national crisis, people and businesses need a Government who are on their side.
The Chancellor spoke of difficult choices, and I agree. There are always choices to be made, such as who to tax and who to shield. Despite his reluctant measures, he is still taking money out of people’s purses and wallets with an increase in national insurance contributions. The changes he is making today prompt a question about why he embarked on them in the first place, despite warnings from the Labour party and from many, many others. It is one thing for the Prime Minister and Chancellor to disagree with each other, but the centrepiece of the Chancellor’s statement today is based on a disagreement with himself. For all his tax rises for millions in the middle, where is the increased tax contribution from the wealthiest in society? A landlord with a large number of properties will not pay a penny more in taxes, but their tenants will. Someone with significant income from buying and selling stocks and shares will not be paying any more in tax, but those people powering our economy will be. The Chancellor has made the wrong choices.
The Chancellor says that we cannot help everyone, which is absolutely true. But who has he been helping out? Those who have been swindling the taxpayer. The Chancellor left open the vaults for widespread waste, crony contracts, and a frenzy of fraud. It was, as his former Tory Treasury Minister put it,
“happy days if you were a crook.”
Seven billion items of personal protective equipment—not usable—are now being burned. Taxpayers’ money is literally going up in smoke, and £3.5 billion worth of contracts were awarded to friends, donors and pub landlords. And it gets worse. The Chancellor has been signing cheques to fraudsters, including organised criminals and drug dealers. Let us put the Chancellor’s fraud failure in context. He has lost a staggering £11.8 billion of public money to fraud. That is twice the amount that a previous Conservative Government lost on Black Wednesday. As a result of—let us face it—that jaw-dropping incompetence, the Conservatives have been funding crime instead of fighting it. Now the Chancellor has the audacity to come to British taxpayers to ask them to pay more to fill his black hole. There can be no cover-up to hide political embarrassments, so let us call in the National Crime Agency to investigate. We need answers and people to be held to account, because—let us be clear—taxpayers want their money back.
The truth is that people can no longer afford the Conservatives. Working families cannot, pensioners cannot and businesses cannot. The weak growth forecasts we have seen today should be flashing red on the Chancellor’s desk. The Chancellor said, in his statement, that the work starts today. Is he serious? The Conservatives have been in government for 12 years, not 12 hours. What has taken them so long? Since his party entered government, the UK has experienced the biggest downgrade in growth of any major economy. Under the last Labour Government, economic growth was 2.1% a year. In the last 12 years under the Conservatives, it has averaged 1.5%. Now we know that growth has been downgraded this year too. Growth is essential for funding our public services, keeping taxes under control and keeping a handle on public finances too. That is why Labour has announced a tough set of fiscal rules to get our debt and our deficit down. The truth is that, because of the Government’s failure to get the economy growing, the Chancellor has had to put up taxes on families and businesses a staggering 15 times.
The Chancellor has raised taxes more in the last two years than any previous Chancellor in the last 50. He says it is all down to the pandemic, but the truth is that the Conservatives have become the party of high taxation because they are the party of low growth. I understand that the Chancellor has a portrait of Nigel Lawson above his desk. Well, today we have an energy price crisis, record prices at the pumps and inflation is back. The truth is that he is not Nigel Lawson: he is Ted Heath with an Instagram account.
Labour would get the economy firing on all cylinders, ensuring that we buy, make and sell more in Britain, scrapping business rates and replacing them with a fairer system fit for the 21st century, something that small and high street businesses are crying out for, and the Chancellor mentioned not at all in his statement today. Labour would make a climate investment pledge to decarbonise the economy, create good jobs in every part of Britain and strengthen our energy security too. Businesses are seeing unprecedented increases in their costs right now, but all we hear from the Chancellor today is the promise of jam tomorrow, not the support that is needed now. Today’s statement lacks the long-term plan for productivity, skills and growth. Where is it?
I cannot help but feel that in both the Chancellor’s recent Mais lecture and his statement today we are presented with increasingly incredible claims. Perhaps the Chancellor has been taking inspiration from the characters in Alice in Wonderland or should I say, Alice in Sunakland? Because nothing there is quite as it seems. It is the sort of place where a Chancellor celebrates giving people £200 to help them with their spiralling energy bills, before explaining that he needs it all back. In Sunakland, the Chancellor proclaims, “I believe in lower taxes”, at the same time as hiking Alice’s national insurance contributions. So Alice asks the Chancellor, “When did lower taxes mean higher taxes? Has down become the new up?” The Chancellor follows Humpty Dumpty’s advice and says,
“When I use a word…it means just what I choose it to mean—neither more nor less.”
Alice knows that under the Conservatives taxes are at their highest level in decades, as a result of the policies of this very same Chancellor. In fact, he was the only G7 finance Minister to raise taxes on working people during this crucial year of recovery. Curiouser and curiouser. As Alice climbs out of the rabbit hole to leave Sunakland, she recalls the words of the White Rabbit and concludes that perhaps the Chancellor’s reality is just different from hers.
The actual reality is that the Chancellor’s failure to back a windfall tax, and his stubborn desire to pursue a national insurance tax rise, are the wrong choices. In eight days’ time, people’s energy bills will rise by 54%. Two weeks today, the Chancellor’s latest tax hike will start hitting working people and their employers. His national insurance tax rise was a bad idea last September, and he has admitted that it is an even worse one today. The Chancellor is making an historic mistake. Today was the day to scrap the tax rise on jobs. Today was the day to bring forward a windfall tax. Today was the day for the Chancellor to set out a plan to support British businesses. But on the basis of the statement today and the misguided choices of the Chancellor, families and businesses will endure significant hardship. The Chancellor has failed to appreciate the scale of the challenge that we face and, yet again, he is making the wrong choices for our country.
Rishi Sunak
I thank the hon. Member for Leeds West (Rachel Reeves) for her reply. She raised several points that I will come to in due course, but listening to her speech it sounded as though covid, and the huge damage it did to our economy and public finances, had never actually happened. It sounded as though we did not have to introduce furlough, support businesses and provide emergency funding to schools, councils and, yes, the NHS. While her party supported all those policies at the time, it now seems unwilling to pay for them. There is a pattern there. Labour is always happy to spend taxpayers’ money, but not to take care of it.
On some of the hon. Lady’s specific points, it was telling that she opened her statement by yet again calling for a windfall tax. On this side of the House, we want to encourage more investment in the North sea, and we want more domestic energy and more jobs for the UK. A windfall tax would put that off, which is why the Prime Minister will bring forward a comprehensive energy security strategy in the coming weeks to address that.
The hon. Lady talked about business rates and supporting businesses. In just a week’s time, small businesses in the retail, hospitality and leisure sector will get a 50% discount on their business rates bill. It is the biggest cut to business rates outside of coronavirus since the business rate system was created—£1.7 billion. I know that she has said that she would like to abolish business rates. She also says she has some fiscal rules, but I have not quite figured out how she will pay for the £25 billion of tax cuts that that would involve—I look forward to hearing it. She talked about defence spending. It is all very well to talk about the size of the Army. At least Labour now seems to think that we should actually have an Army, which is a welcome conversion. It is because of how seriously we take the nation’s security that in 2020, when we had decided to do short-term spending settlements for most Departments, we singled out one Department for special treatment and gave it a four-year settlement in advance of everyone else—that was the Ministry of Defence. In that settlement it received £24 billion of new cash, the largest uplift to defence spending since the end of the cold war, ensuring that we are not just the second-largest spender in Europe in NATO but the fifth largest in the world, a record of which we on the Conservative Benches are very proud.
The hon. Lady talked about pensions. Again, thanks to the actions of Conservative-led Governments since 2010, we put in place the triple lock—not something the Labour party ever did when it was in power. It means that pensions are now £2,300 higher than they were in 2010 and £700 more than if the triple lock had not been in existence during that time. I am pleased to say that the state pension, relative to earnings, is now at its highest level in over 30 years. This party will always be on the side of pensioners.
Turning briefly to the hon. Lady’s comments on tax—fair enough, it is a short time in which to have to respond, but I am not sure if she fully understood the implications of the tax cut announced today. The increase in the national insurance thresholds to equalise them fully is a £6 billion tax cut for 30 million UK workers. It is the largest increase in thresholds ever, the biggest personal tax cut in a decade, and it is worth £330 for those workers. I do not know whether she realised this, because she talked about the levy and making sure that we direct our policy at those who need our help, but there is a reason the independent Institute for Fiscal Studies called this increase the best way to help low and middle earners through the tax system: 70% of workers will pay less tax, even accounting for the levy. It is more generous than the policy she is advocating. Combined with the other tax cuts we have announced today, this plan represents the biggest net cut to personal taxes in a quarter of a century.
Let me conclude by saying this. The plan we have announced today has only been possible because we have taken tough decisions with the public finances. They have not always necessarily been popular, but they always been responsible and always honest. It is two years to the day that the country first entered lockdown and suffered the biggest economic shock in over 300 years. An unprecedented collective national effort was undertaken and two years later this Government have not only fixed the public finances but people are back in jobs, debt is falling and taxes are now being cut. No Government can get every call right. We learn from our mistakes and we strive to improve. But even if they will not admit it, Labour Members will recognise this day as an achievement that we all can celebrate. I have said it before to the Labour party and I will say it again: there is a fine line between reasonable criticism and political opportunism, and in my experience the British people can always tell the difference.
Sir Peter Bottomley (Worthing West) (Con)
I think the shadow Chancellor’s remarks will be best remembered for pointing out that the Conservatives won the 2010 election and the 2019 election. It is probably a very good thing for the country that we did.
The Chancellor has met the major obligations on public spending which helps the economy to grow and which allows for more jobs and more Government revenue. As he pointed out just now, the changes to national insurance do the things that Martin Lewis, as well as the institutes, would applaud. Those three sources of support—he has my support, too—are very welcome.
May I ask the Chancellor to remember that pensioners do not just have the state pension? Many have fixed pensions on top and getting inflation down as fast as possible is vital to them. They cannot go for a bigger pay increase if they are not at work.
Finally, some areas of public spending do not make it easy to have efficiencies. If teachers’ salaries make up most of the cost of education, it is very important to ensure that we do not squeeze education and wreck our schools and our pupils’ future.
On cladding, when amendments to the Building Safety Bill come from the other place, can my right hon. Friend please not keep his purse completely shut? If money needs to be advanced so that homes can be safe and saleable, will he please consider that openly?
Rishi Sunak
I thank my hon. Friend for his support and he is right to highlight some of the independent commentators who have supported the policies announced today. I will touch on one of the things he said, which was about education spending. I agree that it is vital for our country’s future that we support our teachers and children. That is why the Prime Minister announced, in total, £5 billion of catch-up funding to help children to recover the learning they lost during the pandemic, why we are raising per pupil cash amounts by £1,500 over the Parliament, and why we are raising teachers’ starting salaries to £30,000, as our manifesto committed to doing.
Alison Thewliss (Glasgow Central) (SNP)
This tax plan that the Chancellor has announced is very thin. It is lightweight and it is superficial. It is exactly what we have come to expect from this Chancellor. What we heard today from the Chancellor was not enough. It was utterly detached from the needs of our constituents up and down these islands.
This cost of living crisis has been a decade in the making, layer upon layer: austerity, which stripped back public services and punished people through brutal social security cuts; Brexit, which has driven away skilled workers and increased costs for businesses and individuals; covid, where we saw public money splurged in its billions on crony contracts while some people were entirely excluded from support, and now those who got support under the self-employment income support scheme are expected to pay tax on it, just to add insult to injury; and now home energy costs, which were already soaring before the increase in hostilities in Ukraine, are forcing households to the brink. Inflation running at 6.2%, its highest rate in 30 years, is hitting the poorest the hardest. Food prices are rising, especially for the basics, and foodbanks are seeing record numbers of people coming through their doors. The Chancellor says he is going to increase the household support fund, but is that it? Is that it? People are desperate and they need a good deal more help than that.
We know that sanctioning Russia is not cost-free, but the Tories cannot use that as a sleight of hand to distract from the layers of pain that lie beneath the current crisis. Each of those layers has seen political choices and opportunities for change squandered by this UK Tory Government and their predecessors. We see it again today. This Chancellor has increased taxes more in two years than Gordon Brown did in 10, while people are struggling. The Treasury Committee issued a report this morning, which states that the UK Government
“must take further action to support UK households, in particular those on lower incomes to manage the subsequent rise in energy and other costs.”
The Chancellor’s announcement on national insurance contributions is welcome. We have been calling for it for years. It is not something that the Chancellor should have brought today; it is something he should have brought to the House a long time ago. Hiking national insurance is a tax on individuals, but it is also a tax on jobs. Employers are already facing increased costs in energy and materials, and many businesses will not be able to bear such pressure. Small and medium-sized enterprises in particular need more support. Hospitality and tourism have struggled through the pandemic and now the Chancellor is moving VAT from 12.5% back to 20% at a time when consumers have much less money in their pockets. We on the SNP Benches called for the cut before the Chancellor brought it in, and we support UKHospitality’s “VAT’s enough” campaign.
Universal credit has been cut by £20 a week at a time when people need it the most. Carly, a single mum, spoke at the Gingerbread reception on Monday and told us all how important it was that that money was there, because things are tighter than they have ever been. There is no further support for people on legacy benefits and disabled people who often face higher energy costs and have no option on those costs. A taper has been put in place that helps only people who are in work. Benefits are just not going far enough, as they do not keep pace with inflation, and the welfare cap punishes people for their circumstances. There has been an end to the triple lock on pensions and there is nothing for the WASPI women, who are campaigning outside today, who are still losing out on what should have rightfully been theirs.
The Scottish Government, by contrast, are doing what they can within their limited budget, to support people: uprating the eight Scottish social security benefits we control by 6% and increasing the Scottish child payment to £20 a week—a lifeline to families. This UK Government should be doing the same. Taking 5p off fuel is something, but it does not help those who are paying for trains and buses. The Chancellor cut air passenger duty during COP26 but he still offers nothing for the millions of commuters who use public transport every day.
I do not know if the Chancellor has ever had a prepayment meter—I do not think they fit them for swimming pools. However, 4.5 million people—[Interruption.] Hon. Members say it is “pathetic”, but 4.5 million people across these islands experience the stress and despair of watching the money on their prepayment meters run out. Prepayment customers already pay higher bills than those on direct debit and they may struggle even to access the Chancellor’s “heat now, pay later” loan—if it does not automatically go to pay back the debts on that meter. The Fuel Bank Foundation, which provides top-ups to those on prepayment meters who are struggling, has seen a 75% increase in demand already. That was before the prices that we are seeing now.
There was nothing either from the Chancellor for customers using heating oil or LPG, who must fill up by the tank. Those on heating oil have seen their tank costs—for 500 litres in a tank—go from £250 to between £600 and £900. They have no choice about how to get that energy. Where are they in the Chancellor’s priorities today?
Nuclear energy—which the Government touted an awful lot before today and which, interestingly, was missing from the Chancellor’s statement—is not the answer to reducing people’s bills. It is slow and eye-wateringly expensive. We know from the Nuclear Energy (Financing) Bill that the Government’s proposals will add £63 billion to people’s energy bills. They should instead fix the long-standing inequality of grid charging, invest more in onshore and offshore wind, tidal and solar, and bring carbon capture and storage in the north-east of Scotland off their reserve bench. They should make it a real net zero transition worthy of the name.
The Government could invest in a national programme of heat pumps, retrofitting and insulating. I was glad to see the Chancellor’s announcement on home energy efficiency and repairs, because we have called for that for a long time. However, this paltry announcement does not go nearly far enough and does not even meet the significant home energy interventions that Scotland is making.
The Chancellor has choices. He could have looked at a windfall tax on profits. The shadow Chancellor, the hon. Member for Leeds West (Rachel Reeves), was right about oil and gas, but why should Amazon, Serco and Netflix not have to pay up for their mega-profits during the pandemic?
The Chancellor has had a windfall of his own. Tax revenues are higher than expected and the deficit is £30 billion lower than planned. If we look at the OBR report that came out today, we see that VAT has gone up by £21.7 billion—that is £21.7 billion extra in the Chancellor’s coffers—and that the amount from self-assessment is up by £5.2 billion more than was forecast late last year. That could have been used to cushion the cost of living crisis and to invest in renewables and wean us off fossil fuel.
MoneySavingExpert’s Martin Lewis was stark in his warning on Sunday morning:
“As the ‘Money Saving Expert’ who has been known for this, I am virtually out of tools to help people now.”
He said, while watching this statement, that his “head …sunk”. There is no help for people on energy.
In conclusion, people face a crisis that the Chancellor could have done more to avert. In so many ways, he has made the choice not to act. There is nothing for Scotland in his announcement today. We on the Scottish National party Benches look forward to the day when Scotland has a Government with the full fiscal powers to make sure that all our people can have a decent standard of living, and that no child goes to bed with an empty tummy in a cold home.
Rishi Sunak
The hon. Lady said that there is nothing for Scotland in this statement, but maybe she missed the part about the UK-wide fuel duty cut, which, together with the freeze, will save a typical driver £100 and a typical van driver £200 this year. Perhaps she missed the part about the largest increase to personal tax thresholds ever. That £6 billion tax cut will help 2.4 million people in Scotland, starting in just a few months’ time. Indeed, 75,000 businesses will benefit from the employment allowance—again, that £1,000 tax cut for Scottish businesses will come in very shortly.
The hon. Lady mentioned that Scotland, as ever, wants more fiscal autonomy. Scotland already has a considerable degree of fiscal autonomy, and I did not hear whether the SNP will deliver the same income tax cut for Scottish taxpayers that the UK Government will deliver—as paid for in these numbers—in 2024. I look forward to hearing from her that the Scottish Government will cut taxes for their taxpayers with the powers and funding that they will get.
I always want to make sure that we look after the most vulnerable in our society. The hon. Lady mentioned a single mother she knew. I am pleased with and proud, in fact, of this Government’s actions, because by increasing the national living wage in April by 6.6%, by cutting the UC taper rate and through the increase in personal thresholds today, we have ensured—if we take all tax and welfare changes together—that a single mother of two children working full time on the national living wage will now be £1,600 better off.
The hon. Lady made a point about businesses. We are providing a business rate discount for business, and Scotland has received a Barnett share of that money. A business rate discount will come in here for retail, hospitality and leisure businesses in just a few weeks, and I know that the Scottish Government will have the resources to do the same thing.
Lastly, the hon. Lady made a comment about prepayment meters. I am acutely aware that millions of families rely on prepayment meters. That is why, when we designed the energy support package that we announced in February, we had particular care for those people to ensure that they would receive the same benefit. Indeed, we made sure that 40% of them will automatically get the £200 rebate in October. For the remainder, we are working with BEIS and the industry to ensure that all those people get the same benefit as well. They will receive a voucher, a cheque in the post or something called a “special access message” on their phone, by SMS, so that when they go to one of the retailers that they use to top up their meter, they will also benefit from our actions, because this Conservative Government is on the side of everyone.
Mel Stride (Central Devon) (Con)
I broadly welcome my right hon. Friend’s statement. Of course, the devil will always be in the detail and we look forward to seeing him at the Treasury Committee next week, along with the OBR and various economists, including from the IFS, which he mentioned.
I welcome the cut to fuel duty. That will help motorists and consumers and be important for businesses. The VAT reduction relating to energy efficiency and solar is very important in the context of the sanctions on Russia and energy self-sufficiency, where we can achieve it. The hardship fund will be a very targeted measure, which is important, and small businesses will be delighted to have heard about the increase in the employment allowance to £5,000, which was a key ask of the Federation of Small Businesses.
Along with many others in the House, I would have liked the NI increases for next year to have been scrapped in their entirety. However, the threshold increase that my right hon. Friend announced today has been very significant—far more significant than I imagined it would be.
This is the big question that my right hon. Friend will be asked: in the context of the fiscal targets, which I think we all agree that we need to meet, has he used enough of the headroom now as opposed to having that as a hedge against future uncertainties, to which he alluded and which are very real, in terms of inflation, interest rates and the effect on the cost of Government borrowing? Will he say a bit more about the fiscal headroom—he will have had the advantage of seeing the OBR figures, which I have not—and his assessment of that, particularly around the deficit target?
On growth, my right hon. Friend pointed out the OBR downgrades, which are not surprising in a high inflationary environment, and the dampening effect that they will have on consumer demand. I was very pleased that he referred to his Mais lecture, because it will be essential for us to focus on innovation, people and driving up capital investment.
My right hon. Friend referred, I think, to a consultation on how to improve capital investment, on which we lag behind our G7 competitors. Will he tell us more about the timeline for that consultation and when he expects to be able to provide important certainty for businesses in that respect?
Rishi Sunak
I thank my right hon. Friend for his words of support. Let me briefly address his two substantive questions.
The tax plan published in the spring statement document today has a range of options for cutting taxes on investment. I look forward to having a conversation with my right hon. Friend, with colleagues and with the business community about the right way to achieve the outcomes that we want. The final decisions will be announced in the autumn Budget and will take effect in spring 2023 after the super deduction ends; I will not get into the detail now.
We have about 1% of GDP as headroom against both the stock and the flow rules on debt falling and on borrowing. On the borrowing side, that is approximately in line with previous Chancellors. On the stock rule, it is a bit less: the average over the past decade has been about 1.7%. The headroom includes the tax cut in 2024, which has been fully paid for and costed in these numbers. I believe that we are taking a responsible and pragmatic approach, but my right hon. Friend is right to point out the risks. The OBR has said that relatively small changes in the macroeconomic outlook could wipe out the entire headroom. That is why it is right that we continue to be disciplined on public spending.
Several hon. Members rose—
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
At Prime Minister’s questions, the Prime Minister batted away a question about fraud during covid by suggesting that it was just about delivery, but it was the Chancellor who gave the ministerial direction for the bounce back loans to be paid at such speed. With a check that was even 48 hours longer, the Government might have avoided the fraudulent duplicate claims that were not stopped until a month later. The £4.7 billion that was lost to fraud could have mitigated measures such as the national insurance increase. Does the Chancellor now regret that he did not pause for thought and that he was not more cautious about fraud?
Rishi Sunak
I have a lot of respect for the hon. Lady, but on this matter I believe she is wrong. She has incredible hindsight to point out now issues that neither she nor anybody else raised at the time. Quite the opposite, in fact: I was told daily in this Chamber to get money out not in weeks and months, but in hours and days. Putting longer fraud checks in place would have taken weeks, so I stand by the decision that we made.
We have put various safeguards in place. We have blocked £2 billion of bounce back loans—60,000 because of the checks at Companies House. The National Investigation Service and the National Crime Agency are in the process of successfully prosecuting dozens of people. We are striking people off from Companies House and we are investing more today in the NCA, NATIS and the British Business Bank so that they can work on the interventions that we know are doing very well. I think it is wrong for hon. Members to pretend now that they wanted to do something at the time, when they did not.
Greg Clark (Tunbridge Wells) (Con)
I congratulate the Chancellor on a tax-cutting, deficit-cutting, tax-simplifying statement that is very much in the tradition of Nigel Lawson. He mentioned research and development tax credits. Are we on track for our target for investment in R&D across the economy to reach 2.4% of GDP by 2027? When will the changes to R&D tax credits come into effect so that further progress can be made?
Rishi Sunak
I thank my right hon. Friend for his support; I know that this is an area of particular interest and concern for him. The 2.4% comprises two things: what the Government spend and what private businesses spend. I can reassure him that we are more than on track for the Government bit of it: we already spend the OECD average on the 2.4%, and that spending will go up by 50% over this Parliament, so the Government are doing our bit. As I said in my statement and in the Mais lecture, the private sector lags significantly internationally in how much it spends.
The changes that we are making to R&D will all come into effect in the spring next year and will be announced finally in the autumn Budget. My right hon. Friend wrote the foreword to a very helpful report on this topic. I look forward to working with him, with his Committee—the Select Committee on Science and Technology—and with others so that we get these changes right and drive up private sector investment in R&D.
Mr Clive Betts (Sheffield South East) (Lab)
May I draw attention to two stories in the Sheffield Star today? Sheffield is still a city of steel. Ben McIvor, president of Forged Solutions Group, which employs 400 skilled workers in the steel industry, is begging for help with the rise in energy costs, because the company simply cannot pass on those costs to its customers. Workers at Liberty Steel are protesting about the Prime Minister’s broken promise that if we left the EU, he would cut energy bills for steel companies. Why has the Chancellor chosen to break the Prime Minister’s promise?
Rishi Sunak
No, we have provided over £2 billion-worth of support for energy-intensive industries over the past several years—including, I believe, over £600 million for the steel industry. That support comes in a variety of ways, including free allowances and compensation for the emissions trading scheme and other carbon price mechanisms. We also announced hundreds of millions of pounds in the spending review to support the industry to make the transition to using cleaner energy.
Theresa Villiers (Chipping Barnet) (Con)
In the spending review, the Chancellor gave a lifeline to maintained nursery schools by confirming supplementary funding, but not all schools qualify for that funding. May I appeal to him to work with the Secretary of State for Education to identify the modest additional funding needed to put all maintained nursery schools on a stable financial footing for the future?
Rishi Sunak
My right hon. Friend has championed the issue consistently since I have had this job, and she deserves enormous credit. I would be very happy to talk to her and to take her proposals up with the Department for Education.
Sammy Wilson (East Antrim) (DUP)
It would be churlish not to accept that the Chancellor has sought to deal with many of the issues that working families today face, but given the windfall in taxes that he has experienced, I believe that more could have been done to help with fuel costs, energy bills and other cost of living increases. It is significant that the Chancellor could not apply all his tax cuts to Northern Ireland because of the Northern Ireland protocol: that shows that the protocol needs to be dealt with.
At the start of his statement. the Chancellor referred to Ukraine, but surprisingly there was no mention of additional resources for defence—for the defence of this country, the defence of democracy and the defence of values in the face of Putin’s aggression. Why was that absent today?
Rishi Sunak
On fiscal windfalls and headroom, I refer the right hon. Gentleman to my answer to the Chair of the Treasury Committee. Our headrooms are relatively small by historical standards and could be wiped out very easily by small changes in the macroeconomic outlook, so I think that it is wrong to say that there is a huge windfall. Indeed, borrowing for the forthcoming year will be higher than was forecast in October.
On defence, I refer the right hon. Gentleman to my answer to the shadow Chancellor. We increased the defence budget by £24 billion in 2020—the largest increase since the cold war. The Ministry of Defence was the only Department that got a four-year settlement when all the others got just one year. That is how seriously we take the issue.
Huw Merriman (Bexhill and Battle) (Con)
I congratulate the Chancellor on the statement and particularly on the 5p reduction in fuel duty, which I note is temporary. Will he remind all Members of this House that temporary does not mean permanent, and that as the reduction costs £5 billion, if it becomes permanent we will not be able to reduce income tax, which also costs £5 billion, if we are to meet our tests of fiscal responsibility?
Rishi Sunak
I thank my hon. Friend, as ever, for his support. He is right: the fuel duty cut will benefit all our constituents, particularly those in more rural areas and on lower incomes. He is also right to make the point that we need to remain disciplined on public spending. We have fully accounted for the income tax cut in our plans, but it will require collective discipline to deliver those tax cuts and others that we want to see over the remainder of this Parliament.
Alison McGovern (Wirral South) (Lab)
The Government have been warned privately and publicly not to make up employment statistics, so alarm bells rang when the Chancellor of the Exchequer glossed over the employment numbers in his statement just now. The small print reveals that unemployment is forecast to rise next year and then plateau, so may I ask him what the Department for Work and Pensions is playing at?
Rishi Sunak
Unemployment is at an almost record low level of 3.9% at the moment. The OBR’s forecasts overall are lower than its October forecasts and are still at very low levels of 4.2%-ish throughout the forecast period. We are very proud of this Government’s track record on jobs, with record numbers of people on payroll. Despite the forecasts of millions of people unemployed, we have managed to successfully get everyone back to work, with a record number of job vacancies, and we will continue to focus on that.
Sir Edward Leigh (Gainsborough) (Con)
With the world economy facing unparalleled challenges from at least two of the four horsemen of the apocalypse—death from plague and war—and with all the challenges that the Chancellor faces, I wonder whether anybody seriously believes, after a decade of unfunded spending promises, that tax would be any lower under a Labour Government. That is a question that I think the Labour party should answer.
May I ask a question on behalf of people of pensionable age? More and more of them are having to wait a long time—up to two years—for so-called minor operations, which can be very debilitating and very painful. More and more people on middle incomes are dipping into their savings or going into debt to pay for private operations. Will the Chancellor keep an open mind about helping those people with some sort of tax relief—if not on insurance, on the cost of operations that are delayed for up to two years?
Rishi Sunak
I am always happy to take suggestions from my right hon. Friend. He has identified a pressing problem faced by all our constituents who are waiting longer than we would like for elective treatment in particular. Every penny of our new health and care levy will go to the NHS and social care so we can make a start on that backlog. We are backing the NHS to help it to reduce its backlogs, and my right hon. Friend is right to raise this issue.
Sarah Olney (Richmond Park) (LD)
Households are facing the biggest hit to living standards on record, and they were looking to the Chancellor today to offer them some hope. We know from the OBR forecast that the Treasury will take an additional £13 billion in VAT thanks to inflation. Will the Chancellor tell us why he has not announced the emergency cut that the Liberal Democrats have called for, which would put £600 back into the pockets of the average family? VAT is an unfair tax that puts up prices for every single family in the UK, and makes up half of all the taxes paid by the poorest households compared with less than a fifth of those paid by the richest.
Rishi Sunak
I think it wrong to suggest that there has been a VAT windfall. If the hon. Lady looks at the numbers in the OBR forecast, she will see that its projection for VAT receipts in the forthcoming year is lower than its previous projection in October. We are helping working families, with a £6 billion tax cut which will put £330 into the pockets of 30 million workers across the United Kingdom.
Robert Jenrick (Newark) (Con)
I think that when my right hon. Friend gets back to his office, that portrait of Nigel Lawson will be looking down at him admiringly. This is a Conservative plan that we can all get behind. It rewards work, it gets the deficit down, and it incentivises investment from businesses rather than penalising them with windfall taxes.
As my right hon. Friend knows, energy prices are very volatile, so he is right to stand by the £9 billion package that he introduced previously and wait until the next update on the energy price cap in the late summer. If it does indeed show that energy prices are going to rise substantially, that will have a big impact on the poorest households. Will my right hon. Friend assure us that he will keep this matter under review, and will consider further measures if necessary to protect those households?
Rishi Sunak
I thank my right hon. Friend for his warm words of support, and I can reassure him that we keep everything under review. We have stood by the British people over the past few years, and we will continue to stand by them. It is thanks to the responsible decisions of this Government that we are able to provide the support that is required when the times call for it.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Consumer spending is vital to the growth of our economy in the aftermath of the pandemic, but with inflation at its highest level for 30 years—the Chancellor has seen the data—consumer confidence is declining, hitting our small businesses hard and setting back their recovery from the pandemic. Why on earth is the Chancellor not fully U-turning on his rise in national insurance contributions at this time—a rise that the Government themselves have admitted will increase inflation and decrease spending power?
Rishi Sunak
The hon. Lady may not realise that for 70% of people, this is more generous than doing what she suggests. Those people will pay less tax as a result of this policy as opposed to the one that she advocates, and I believe that it is the right policy. We are on the side of hard-working people, and this will help them at a time when they need that help.
Stephen Hammond (Wimbledon) (Con)
I thank the Chancellor for his statement, which has been warmly welcomed by the people and businesses of Wimbledon, and commend him for his analysis of some of the challenges to the economy. One measure that he could move from temporary to permanent is the super deduction, so will he consider that as part of his consultation? I think it is already evident that this would be the most effective way of changing behaviour and securing greater R&D and capital expenditure.
Rishi Sunak
I thank my hon. Friend for what he has said, and look forward to discussing those topics with him over the coming months. The document outlines a range of options for cutting taxes on investment. Hopefully he will have a chance to digest those, and I look forward to discussing them with him.
Stephen Timms (East Ham) (Lab)
The Conservative party introduced universal credit, but instead of uprating it in line with current inflation, the Chancellor has chosen to increase the size of the household support fund. Those who have heard of it have to go to their local councils to receive it. What evidence, if any, does the Chancellor have that the fund is effective in delivering help to the families who need help most?
Rishi Sunak
The feedback that I receive from colleagues suggests that it has been effective, and I trust councils to know who are the people in their areas who most need our help. I used to be a local government Minister, and, as the right hon. Gentleman knows, I have enormous respect and regard for local authorities. However, we did not just do that: in the autumn Budget, we gave a £2 billion cut through the tax rate on universal credit to nearly 2 million people on the lowest incomes.
Robert Halfon (Harlow) (Con)
I thank my right hon. Friend heartily for the cut in fuel duty, and for waiving the national insurance threshold. I hope I can now retire from campaigning on that issue; it would make my life a lot easier! My right hon. Friend has stood up for workers and for people on low incomes, and we should not forget that. As he said, it is this party that is the true workers’ party of the United Kingdom.
When my right hon. Friend considers a reform of the apprenticeship levy, will he ensure that at its heart is a focus on enabling more disadvantaged young people to take up apprenticeships, including degree apprenticeships?
Rishi Sunak
I thank my right hon. Friend for his support, and I can give him that reassurance. Apprenticeships are fantastic and we want to ensure that they are continually supported, but we will look at all aspects of this to ensure that we also provide incentives for the training that we want to see. My right hon. Friend is right to emphasise that this is the party of the workers, and that is in no small part thanks to his campaigning. I congratulate him on making the case so well.
David Linden (Glasgow East) (SNP)
It is clear from the Chancellor’s statement that he wanted the buzzword to be security, but one of the issues that did not appear in the statement was food insecurity. Given that 60% of Glaswegians do not possess a car and many of my constituents do not own their homes to put solar panels on them, what does the Chancellor say to the people whose children will go to bed hungry tonight, and why was there no mention of that in his statement?
Rishi Sunak
We have already created the holiday activity and food programme, which provides both food and enriching activities for children outside term time. There is also the household support fund, and Barnett consequentials will enable the Scottish Government to provide the same support for vulnerable families in their communities.
Kevin Hollinrake (Thirsk and Malton) (Con)
I warmly welcome the Chancellor’s statement and, in particular, the rise in the national insurance threshold. It will not only help low earners, which is important, but bring a welcome simplicity to the system. I also welcome the reform of the apprenticeship levy, but will the Chancellor look at the amount that can be transferred through the annual levy transfer? It is currently capped for larger organisations, and that restricts the amount that they can give to smaller organisations. A reform would see much better use of the apprenticeship levy, which would help small and medium-sized enterprises, local authorities and others.
Rishi Sunak
I thank my hon. Friend for his support. He is right to point out that the significant increase in personal tax thresholds is particularly well targeted at those on lower and middle incomes, and I look forward to discussing with him, over the coming months, potential reforms in the way in which we tax training and apprenticeships.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
I have just received a message from Michael, who is a carer for his disabled wife in Hull. He says:
“So no help for the disabled. I guess I’ll have to put my wife into hospital next winter so she can stay warm”.
What would the Chancellor say to Michael, who does not drive a car and is not planning to install solar panels on his rented home?
Rishi Sunak
Obviously it is hard for me to comment on individual circumstances, but in general I am proud of this Government’s support for those who are disabled. We have spent some £58 billion on disability welfare. When I last checked the figures, the OECD ranked us higher than many other countries, including the United States, Canada, Australia, New Zealand, Germany and Austria, so we are generous and compassionate in our support for those who are disabled.
We are taking a range of measures, not least spending £1 billion to help people with disabilities into work and providing £1.5 billion for the disabled facilities grant to improve the conditions of their homes. Today we announced a small amount of extra funding to improve the provision of Changing Places toilets across the country, an issue about which I care passionately. That funding will increase their number by 40%, so that the quarter of a million people with complex disabilities who need access to such facilities will now find one closer to where they need it.
Darren Henry (Broxtowe) (Con)
I thank the Chancellor for what I thought was an excellent spring statement, and look forward to seeing how it will benefit my constituents. I was particularly pleased to hear about the cut in fuel duty. However, I was a bit disappointed not to hear anything specific about an increase in funding for mental health. Is that something that the Chancellor will consider in the future?
Rishi Sunak
I am happy to tell my hon. Friend that we announced a significant increase for the NHS back at the spending review in the autumn, with a record NHS spending settlement including big increases for mental health. The Department of Health and Social Care will be able to provide him with the exact split, but he can rest assured that we are making good progress with dedicated funding for the cause that he rightly champions.
John McDonnell (Hayes and Harlington) (Lab)
Let us be absolutely clear that benefits and pensions are going to rise by 3.1% while inflation is predicted to be between 7% and 10%. That is a cut for some of the poorest in our society. I want to make this specific appeal to the Chancellor. The people I am desperately worried about in my constituency are those who are forced to live on benefit, largely through disability or ill health, and the poorer pensioners. We know that energy prices are rising rapidly, and that the assistance provided so far will not enable them to cope. When we get to November, those people will be freezing in their own homes and lives will be put at risk. One simple solution is to double the winter fuel allowance. Can I appeal to him to go away, think about that and come back sooner rather than later to give vulnerable people some confidence in the future?
Rishi Sunak
All the people the right hon. Gentleman mentioned will benefit from the proposals we put forward last month, with £9 million to help everybody. The doubling in size of the household support fund is there for his local council and others to use to support those most in need, and he is right to highlight the winter fuel payments, which are payments of up to £300 for those pensioners. Many of those on pension credit will also have access to the warm home discount, which is an extra £150.
Anthony Browne (South Cambridgeshire) (Con)
As a member of the Treasury Committee and chair of the Conservative Back-Bench Treasury committee, I congratulate the Chancellor on this spring statement’s tax cutting and tax simplifying, with many measures to help hard-working families make ends meet and to promote economic growth. I also very much welcome the publication of the tax plan. Too often, Governments are tactical about their tax policies, leaving great uncertainty for businesses about what will happen next. We now have a strategy for the years ahead. Tax policy must be informed by a strategy; it also needs to be credible and fair. Can my right hon. Friend confirm that, in all the measures the Treasury has introduced since 2019, it is the poorest households that have benefited the most and the wealthiest that have contributed the most?
Rishi Sunak
I congratulate my hon. Friend on his new appointment and look forward to working with him in both his committees over the coming months, particularly to flesh out the business tax options that we want to finalise by the autumn Budget. He is right to say that the distribution analysis published today, which looks at all tax, welfare and spending decisions, shows that this Government have been highly progressive in their actions and that those on the lowest incomes have benefited the most.
Caroline Lucas (Brighton, Pavilion) (Green)
Once again, quite incredibly, there is climate-shaped hole at the heart of this statement. Once again, the Chancellor did not even mention the word “climate”. That is all the more unforgivable as the measures we need to tackle the climate crisis and those we need to tackle the cost of living crisis are the same. With 6 million people now facing fuel poverty, where is the home retrofit revolution and the investment that we need to make 19 million homes warmer by 2030, saving families £400 on their bills and creating hundreds of thousands of jobs in the process? How many more people will have to freeze in their homes before he will act?
Rishi Sunak
We already acted in the spending review last autumn to outline billions of pounds to improve the energy efficiency of hundreds of thousands of homes across the country. The hon. Lady is right to say that that saves £300. We have grants available of up to £20,000, depending on the scheme, that will do that over the remainder of this Parliament. Also, the energy company obligation does the same thing for hundreds of thousands of people in fuel poverty through their energy bills. So we already did it; we are getting on with it. And I think she missed the fact we have just cut VAT today on energy-saving materials.
Andrew Jones (Harrogate and Knaresborough) (Con)
I welcome the statement from the Chancellor today, and in particular the way in which the most support is being provided to those who will need it most. Can I ask specifically about the section on the research and development review? Much of our economy is going digital and we are seeing an increasing focus on the knowledge economy and the creative sectors. Will that be at the core of his investment plans for the future, since that is how we will secure future growth?
Rishi Sunak
My hon. Friend, as ever, makes a thoughtful point. Innovation, broadly defined, along with multi-factor productivity, accounts for about half our productivity growth. The pace has slowed recently and we need to reinvigorate it. I set out a strategy to do that at the Mais lecture, and key to that will be driving up private sector investment in R&D and innovation. The tax cuts and reforms we will put in place in the autumn will help us to achieve that end.
Clive Efford (Eltham) (Lab)
Can the Chancellor confirm that someone in employment who is on universal credit will see an increase in the taper between £9,500 and £12,500—a £1,290 clawback to the Chancellor? What is he doing to address that issue, which will involve the poorest workers in the country facing a £1,290 increase in their taxes?
Rishi Sunak
I think the hon. Gentleman is describing how the taper works. It withdraws benefits as people’s incomes rise. That is how the system is designed. However, I can tell him that, because we took action to cut the universal credit taper rate last autumn, we delivered a tax cut of £2 billion for almost 2 million people. I gave the example earlier of a single mother with two children who is renting and working full time on the national living wage. As a result of all our tax, welfare and wage changes, that person will be £1,600 better off.
Richard Drax (South Dorset) (Con)
I commend my right hon. Friend for his statement, as far as it went. He is right to say that he cannot print more money, borrow more money or spend more money. Can I ask him to bring forward the tax cuts, particularly for the lower earners, because as he rightly says, they spend their money far more wisely than the Government do? That will put more cash in their pockets to meet the increasing bills.
Rishi Sunak
That is exactly what we are doing. The increase in the personal tax threshold in July was brought in far quicker than these things normally are, but we wanted to do it as quickly as possible. This will put £330 in the pockets of 30 million people up and down the country.
Lilian Greenwood (Nottingham South) (Lab)
This year, the Chancellor is delivering the largest fall in living standards since Office for National Statistics records began in 1956-57. Will he tell us how many more people will fall into poverty as a result of his failure to ensure that increases in social security match inflation?
Rishi Sunak
The hon. Lady is describing the impact of inflation on people’s incomes. Of course that will have an impact; we have been very clear and honest about that. That is not just happening here; it is happening everywhere across the world as we grapple with higher inflation, but the measures we are taking today will make a significant difference to support working families in weathering some of the challenges ahead. Again, for those who are most vulnerable, we started this journey in autumn with a tax cut to universal credit, and we are doubling the household support fund today to £1 billion.
Ruth Edwards (Rushcliffe) (Con)
I welcome the Chancellor’s statement today. It will do a lot to help many of my constituents in Rushcliffe. Can he reassure me and my constituents that the tax-cutting measures announced today will continue to be the focus of this Conservative Government and that they are just the start of what is possible if we continue to build a stronger, greener economy?
Rishi Sunak
My hon. Friend is absolutely right. We started in October, and we have made progress today. The tax plan published today shows that we will continue to make progress, cutting taxes for businesses and people over the remainder of this Parliament.
Ian Paisley (North Antrim) (DUP)
The Chancellor is of course the Conservative and Unionist Chancellor for all of the United Kingdom, but is it not a fact that because of the deficiencies in the Northern Ireland protocol, none of his flagship programmes will apply to Northern Ireland until he goes cap in hand to the European Community and seeks its permission to apply these VAT differentials to Northern Ireland? If the European Community says no, what is the Conservative and Unionist Chancellor going to do for our part of the United Kingdom?
Rishi Sunak
The hon. Gentleman is right, and I have specifically highlighted the deficiencies of the protocol. I look forward to having those discussions with the Commission. Obviously these are not particularly traded goods, because they are installed, so there ought to be a strong argument that they are included, particularly as we are all now collectively grappling with an energy crisis. However, I do not want to pre-empt the Foreign Secretary’s conversations on the protocol. It is not right to say that the flagship policies do not apply to Northern Ireland. The increase in the personal tax thresholds, the income tax cut and the fuel duty cut will apply to Northern Ireland, and I know that they will benefit his constituents and millions of others across Northern Ireland.
Peter Aldous (Waveney) (Con)
I welcome the announcements that my right hon. Friend has made about national insurance thresholds, fuel duty and the increase in the household support fund. The past two years have been very challenging for the poorest and most vulnerable, and it is going to get a whole lot tougher. As we saw with his swift and right decision to raise universal credit at the start of the pandemic—this was too hastily reduced—the best way of targeting support for those who need it is through the benefits system. May I urge him to look closely in the coming days and weeks at the levels of UC and other benefits, and the means of uprating them?
Rishi Sunak
I thank my hon. Friend for that. I strongly believe that the best way to help people sustainably is to move them off welfare and into work. That is what this Government are doing. Our record on doing so is incredibly strong, and we are throwing the kitchen sink, in terms of both money and policies, which the International Monetary Fund has described as “well targeted”, at supporting people as they make that transition and putting more money in their pockets.
Andy McDonald (Middlesbrough) (Lab)
The Chancellor really has not helped those in greatest need. The Joseph Rowntree Foundation says that the current uprating of working-age social security benefits will mean 400,000 people falling into poverty this year. With inflation now forecast to average about 8% in 2023, will he reflect on the very different circumstances the country finds itself in and uprate benefits by the inflation rate forecast in the OBR’s economic and fiscal outlook?
Rishi Sunak
The way that benefits and indeed pensions are uprated is the same every year, and it has been done in the same way for more than a decade. We are making sure that we support people from welfare into work, which is the most sustainable way to help them. Someone moving from UC into full-time work at the national living wage is £6,000 better off. That is why I am pleased that because of our management of the economy there are now record numbers of job vacancies and the support to help people get those jobs.
Gareth Davies (Grantham and Stamford) (Con)
Thousands of people across my constituency will welcome the targeted measures announced by the Chancellor today. Will he reconfirm for the House that he agrees that the best way to tackle the cost of living issues that people face is through the dignity of a job and the security of a regular pay cheque? That is why it is so important that unemployment—[Interruption.] I ask Opposition Members to listen. It is why it is so important that unemployment has fallen every month for the past year, and they should welcome that.
Rishi Sunak
My hon. Friend is absolutely right and puts the point eloquently: the best way to help people is to get them into work. That is why we are creating record numbers of jobs and then making sure that not only are those jobs well paid, but people keep more of the money they earn. That is the approach of this Conservative Government.
Tim Farron (Westmorland and Lonsdale) (LD)
There appears to be no plan from the Chancellor, glossy or otherwise, for farming and food security. Is he aware that hundreds and hundreds of farmers are leaving the industry because of the botching of the transition from the old basic payment scheme to the new system? If he were to peg the basic payment scheme at its current rate, rather than halving it over the next two years, he would at least give time for farmers to be able to catch up and get into the new schemes. As it stands, farmers are leaving the industry just at the moment when we are facing an international food security crisis. Will he rethink and back British farmers?
Rishi Sunak
As the hon. Gentleman knows well, given that we are constituency neighbours, I also represent plenty of farmers and I listen to their concerns. The Agriculture Secretary is doing an excellent job of transitioning from the old system to the new. The overall funding for farming has been protected by this Government and the same level of funding is available, as we promised it would be. I want to see more British food grown here and to see us supporting British food—of course I do, and I think the British public will as well.
Mike Wood (Dudley South) (Con)
The shadow Chancellor quoted Money Saving Expert Martin Lewis’s comments from before the spring statement, but since the statement he has written:
“That £3,000 rise of threshold to £12,570 is a gain of £330 a year and more than offsets the…rise for many on lower incomes. Good call.”
Just what proportion of workers will now be getting more money from the higher threshold than they pay in the health and social care levy?
Rishi Sunak
I am grateful to my hon. Friend for sharing that helpful tweet with the House, but I would say to him that the number he is looking for is 70%—70% of workers will pay less because of the increase in thresholds, even taking into account the new levy. That is why this Government are on the side of hard-working British taxpayers.
Kate Green (Stretford and Urmston) (Lab)
I do not think the Chancellor understands the depth of despair and fear among the very lowest-income households in this country, for example, those whose incomes were already below the thresholds for national insurance or tax—those who have to rely on social security benefits as they are not able to work because of caring responsibilities, health or disability. To uprate benefits by less than half the rate of inflation at the same time as families face particular pressures on paying for the basics of energy and food will simply leave those families destitute. Will he please heed the calls from around the House this afternoon and look again at his benefits uprating policy?
Rishi Sunak
As I have said, for those who are most vulnerable we are providing an extra half a billion pounds, and we are doubling the size of the household fund—local authorities are best placed to direct that funding. But we do want to support people into work, which is why I am proud of the record we have.
Felicity Buchan (Kensington) (Con)
I warmly welcome the tax cuts announced today, especially with the focus on low and middle earners. I note that the OBR has said today that interest payments on debt will quadruple next year. Does my right hon. Friend agree that with interest payments on our debt at £80 billion we need to maintain discipline on spending going forward?
Rishi Sunak
My hon. Friend makes an excellent point. She is absolutely right; the increase in debt payments is historic and it gives a glimpse of some of the risks facing us going forward. That is why it is right that we maintain headroom against our fiscal rules, and the best way to do that, in order to deliver a lower-tax economy, is to remain very disciplined on further public spending.
Dave Doogan (Angus) (SNP)
The Chancellor has detailed a small number of fiscal interventions and they will be a small mercy for the poorest in our society. May I ask his advice on what families with a child suffering from a life-shortening condition will receive as a result of his measures today? Children suffering from life-limiting conditions are often at home, where they need to be kept warm 24 hours a day, seven days a week, often with specialist equipment running. The Children’s Hospices Across Scotland charity is receiving alarming calls from people whose energy bill estimates are going up in the region of £268 to £720 a month. What hope for them, Chancellor?
Rishi Sunak
In the autumn spending review we announced record funding settlements, not just for health, but across the board. That resulted in Barnett consequentials of, if I recall it correctly, about £4.5 billion annually for the Scottish Government. Obviously, they can use that to support their local communities in the way that they feel is best. Again, there have been further Barnetts today as a result of the household support fund.
Paul Bristow (Peterborough) (Con)
With a 5p cut in fuel duty, the lifting of the national insurance threshold and a plan to cut income tax, will my right hon. Friend reiterate that this Government are a tax-cutting Government? On the Government side of the House, we trust people on how best to spend their own money.
Rishi Sunak
My hon. Friend makes an excellent point and he is absolutely right: we want people to be able to keep more of their own money. The tax plan announced today represents the biggest net cut to personal taxes in a quarter of a century, proving that we very much are on the side of hard-working British people.
Ellie Reeves (Lewisham West and Penge) (Lab)
Many of my constituents are having to choose between putting food on the table or heating their homes. At my local food bank last week, staff told me that they were facing levels of demand that they had never seen before. Meanwhile, the boss of BP’s salary has increased to almost £4.5 million. Surely the Chancellor must see that it is time for a windfall tax on oil and gas, to tackle rising energy bills.
Rishi Sunak
I have already addressed this and I urge the hon. Lady to wait for the Prime Minister’s forthcoming energy security strategy, which will ensure that British people have affordable, secure and reliable energy and, most importantly, in the process will support British jobs and British investment.
Robin Millar (Aberconwy) (Con)
I welcome this statement and I agree with the Chancellor that this is a statement for the Union, because in these uncertain and unusual times it is the strength of our economy that helps us in positions on defence, trade and more. We are maintaining generous levels of support for devolved Administrations, in Scotland, in Wales and in parts of England. So it is vital that UK taxpayers can be assured that they are receiving value for money for expenditure behind devolved curtains. Will the new Cabinet Efficiency and Value for Money Committee be paying attention to that?
Rishi Sunak
My hon. Friend makes an excellent point. I look forward to taking up his suggestion and having further conversations with him about it. I am glad that over 1 million Welsh taxpayers will benefit from the announcements we made today.
Zarah Sultana (Coventry South) (Lab)
The richest Member of Parliament just spoke about how he understands the impact that the cost of living crisis is having on millions of people, but what he said will sound like a cruel joke to people across the country. Energy bills are rocketing, while fossil fuel giants BP and Shell are set to make £40 billion in profits this year. Why has the Chancellor refused to introduce a windfall tax on those companies to fund the restoration of the old, lower, energy cap? Is it because he would rather squeeze the livelihoods of ordinary people than the profits of the super-rich?
Rishi Sunak
With regards to the livelihoods of ordinary people, they have just received a £330 tax cut today and a discount on their fuel bill, with more tax cuts to come. This Government are on the side of hard-working British families.
Matt Vickers (Stockton South) (Con)
I want to ask about the national insurance threshold change—the one that Martin Lewis described as “the big one”. Can my right hon. tax-cutting Friend confirm that this will result in an actual tax cut for more than 30 million people—in fact, for anyone who earns less than £35,000?
Rishi Sunak
My hon. Friend and constituency neighbour is absolutely right, and I thank him for his support. This change will put £330 in the pockets of 30 million hard-working British families, including many in Stockton South, and it means that 70% of workers will be better off, even accounting for the new health and care levy.
Stephen Kinnock (Aberavon) (Lab)
In his reply to my hon. Friend the Member for Sheffield South East (Mr Betts) on steel, the Chancellor talked a lot about the steel compensation that has been paid. While that is, of course, welcome, the fact is that British steelmakers are still paying 61% more than their German competitors. Steel is a foundational industry that is about good jobs, decarbonisation and our sovereign capability, so why is there absolutely nothing in the statement for our steel industry?
Rishi Sunak
We have programmes in place to support our energy-intensive industries, and we remain in close dialogue with all companies in all sectors. Our track record on supporting industry is strong, and we continue to create jobs and make sure that British workers are well supported.
Mr Louie French (Old Bexley and Sidcup) (Con)
I welcome the Chancellor’s announcements today, which will help people across Old Bexley and Sidcup with the cost of living, and support local businesses as our local economy recovers. However, in stark contrast to these announcements, people in outer-London areas such as Bexley are facing an eye-watering 8.8% increase in the Labour Mayor of London’s council tax precept, which we continue to see little benefit from. Even worse, drivers and local businesses face the prospect of paying more than £4,000 a year as a result of the ultra low emission zone expansion. That is clearly a tax raid that will have little proven environmental impact on outer London. Does he agree that this tax raid by Sadiq Khan on hard-working people across Bexley should be stopped?
Rishi Sunak
My hon. Friend makes an excellent point. Even if the Labour Mayor of London is not standing up for his constituents, I know my hon. Friend will stand up for his hard-working constituents in Bexley and Sidcup. He will have seen today that we are on their side; we are cutting their taxes.
Wera Hobhouse (Bath) (LD)
The Chancellor is still not agreeing to a windfall tax on the super profits of the oil and gas giants. Such a tax would hit the shareholders, not workers and their jobs. It would not hamper business from operating successfully. Why is he protecting wealthy shareholders?
Rishi Sunak
I fear this is getting a little repetitive. I believe that we will see more investment in British industry, more investment in the North sea, more energy security and more jobs created. I look forward to companies bringing forward their plans for that in the coming weeks and months.
Alex Norris (Nottingham North) (Lab/Co-op)
I am old enough to remember when levelling up was the centrepiece of the Government’s domestic policy. People will be incredulous that we did not hear a single mention of it from the Chancellor this afternoon. He talks of low growth; we have low growth because we are not unleashing the potential of the regions of this country. It is time for the Chancellor to just admit that levelling up is a sham.
Rishi Sunak
The White Paper from the Secretary of State for Levelling Up, Housing and Communities was in fact warmly welcomed by many colleagues from across the House. More broadly, is backed up with tens, if not hundreds, of billions of pounds of extra funding. The results are seen in our employment growth, which has been strongest in those regions outside London and the south-east.
Florence Eshalomi (Vauxhall) (Lab/Co-op)
The Chancellor confirmed a business rate discount for businesses up and down the country, to a rateable value of £110,000. A number of businesses in my constituency do not qualify for that. A number of businesses across London did not get any benefit during the pandemic. One of the key ways that the Chancellor could help many businesses—not just those in Vauxhall—is through VAT cuts for tourism. People are not coming back to the tourism sector; we have seen record low numbers. Does the Chancellor agree that a permanent cut to 12.5% will help those businesses get back on their feet?
Rishi Sunak
All statistics show that the hospitality industry is recovering very well: cash balances are healthy, and business insolvencies are down. That is in part thanks to the support that we have put behind that industry. The uncapped business rate discount will provide support to hundreds of thousands of businesses. It is right that we target support at those who need our help most, whether they are businesses or families and individuals.
Patrick Grady (Glasgow North) (SNP)
Is the humanitarian funding that the Chancellor announced for Ukraine in addition to aid flows already planned within the 0.5% budget, or will it squeeze planned expenditure elsewhere in the Foreign, Commonwealth and Development Office?
Rishi Sunak
All official development assistance announcements are handled by the Foreign Secretary. Within the overall budget, there is always contingency, and space annually for responses to humanitarian disasters that cannot be foreseen. It is not a question of squeezing other things out at all; this is part of planned spend.
Chris Bryant (Rhondda) (Lab)
I commend the Government’s action on Russian sanctions, but we cannot possibly think that this is “job done.” Mariupol still burns; children are fleeing the bombing of their home. We still have not even introduced a sanction regime that is as tough as the sanction regime on Iran. Can I urge the Chancellor to go a bit further? We need to sanction all the Russian banks, not just 60% of them. We need to tackle the trust funds, such as that recently set up by Alisher Usmanov to protect his assets in the UK. We need to tackle the families and the hangers-on, such as Lavrov’s family, who are in the UK, and we need to tackle shipping. We must do all these things for the people of Ukraine as fast as possible.
Rishi Sunak
I have been working very closely with my counterparts in G7 economies and beyond to co-ordinate our financial and economic sanctions, which I am more responsible for. I am highly confident that what we have done is world-leading, particularly with regards to acts on bank freezes. We are constantly in dialogue with our partners to make sure the action we take is effective when it is co-ordinated.
Rishi Sunak
No, it is not remotely, actually. There has been good unity in the House on this topic. The hon. Gentleman claims that somehow we are behind other countries when it comes to sanctioning Russian banks; it is simply not true. This Government are taking a leading role in this. We are ahead of most of our peers. He does not know, but I know, because I am in the conversations with Finance Ministers about where else they are prepared to go. I am very confident that we have done a lot and have played a leading role internationally in bringing others along with us.
Stephen Farry (North Down) (Alliance)
We have heard the Chancellor try to excuse his failure to increase benefits in line with inflation. He has referred to the universal credit taper and the national living wage, which help those people on benefits who are in work. However, does he recognise that the majority of people on benefits in the UK are not in work, and there is nothing in this budget to help them?
Rishi Sunak
I think the hon. Gentleman missed the household support fund announcement, which is specifically for local councils, so that they can help those who are most vulnerable. Many of those people who are not currently in work can, with the right support, care and attention, be supported into work. That is something that this Government are spending a lot on doing.
Barbara Keeley (Worsley and Eccles South) (Lab)
Today, the Welsh Government announced a £500 payment to unpaid family carers, to recognise their commitment during the pandemic. Unpaid carers in Scotland receive the carer’s allowance supplement. Meanwhile, carers in England get a miserly carer’s allowance, which is increasing by only £2 this year. That means not only that the sacrifice and commitment of unpaid carers in England is going unrewarded, but that carers are being driven further into financial hardship. How many more need to be pushed into poverty before this Government act to value carers, and give them the targeted support they deserve?
Rishi Sunak
We do value carers. There are fewer people in poverty today than when we first came into office—1.7 million people fewer in absolute poverty than in 2010, after housing costs. Also, today we have topped up the household support fund, in order to provide support to the most vulnerable who need help.
Sam Tarry (Ilford South) (Lab)
This week it was revealed that 75% of people in my constituency are struggling to pay for basic groceries. The OBR’s analysis following today’s statement has said that we face the largest fall in disposable incomes since the 1950s. Will the Chancellor visit my constituency, sit down with the people who use the local food bank, many of whom are in work, and see just how little the policies announced today will do to support them, to get them into work, and to allow them to live with dignity in their community?
Rishi Sunak
The hon. Gentleman is simply wrong. Those in work, particularly on low incomes, will benefit disproportionately from the policies that have been announced today. I have given plenty of examples already, but a single mother with two children who is renting, on universal credit, and working full time, earning the national living wage, will be £1,600 better off as a result of all the policies we have announced on taxes and welfare. We are supporting exactly the people the hon. Gentleman talks about.
Deidre Brock (Edinburgh North and Leith) (SNP)
The Climate Change Committee’s estimates suggest that the overall price tag for retrofitting the UK’s homes—considered some of the most leaky and energy-inefficient in Europe—is £27 billion a year over the next 25 years. Will the Chancellor recognise that this issue needs real commitment and investment, not just tinkering around the edges?
Rishi Sunak
No. In the spending review, we announced the largest investment in upgrading home energy efficiency that this country has ever seen—billions and billions of pounds across a range of different schemes, helping hundreds of thousands of households with the costs of upgrading their energy.
Barry Gardiner (Brent North) (Lab)
Can the Chancellor explain why, in the fifth-richest country in the world, and under his stewardship of the economy, this morning’s news reported that a mother would not accept potatoes from a food bank because she did not have enough money to boil them?
Rishi Sunak
I am very sorry to hear that, and I am hopeful—in fact, confident—that the policies we have announced today will help those who are most vulnerable. We have made sure, as we have over the last two years, that we are standing by the British people, and that is what the policies announced today do.
Karin Smyth (Bristol South) (Lab)
I am old enough to remember the rampant inflation of the 1990s, when I started my career. I am old enough to remember when, under Ted Heath’s Government, we had to go to the local café because we had no lights on in the house. However, I am not old enough to remember Anthony Eden and the 1950s. What does the Chancellor have to say today to pensioners who worked through the 1950s about the fact that he is presiding over the greatest fall in living standards since that time?
Rishi Sunak
I am pleased that, because of the actions of Conservative-led Governments since 2010, the state pension is £2,000 higher today; 700 of that is specifically because of the triple lock. That shows that this Government are on the side of pensioners.
Tommy Sheppard (Edinburgh East) (SNP)
The Chancellor is proposing to cut the value of state social security payments by at least 4% and putting up tax rates for those on average and below-average incomes, yet he refuses even to countenance asking those who have extreme wealth, or the corporations that are making obscene profits, to pay a little more. Is not the truth, Chancellor, that this is just a plan to increase inequality in the United Kingdom?
Rishi Sunak
We are asking companies—especially large successful companies—to pay more. That was announced last year and legislated for, and it will come into force next year. The corporation tax rate will rise from 19% to 25% to ensure that we do spread the burden fairly in recovering from coronavirus.
Mrs Emma Lewell-Buck (South Shields) (Lab)
The household support fund exists only because, thanks to this Chancellor, people do not have enough income to eat or to pay their bills. With pensions and benefits set to rise by a measly 3.1% and the minimum wage by 59p, and with inflation peaking at over 7%, today’s uplift to the fund is more evidence of his continued failure to protect the hardest hit, isn't it?
Rishi Sunak
The national living wage is actually going up by 6.6%—it is one of the highest increases we have seen in the national living wage, and it will mean that someone working full time on the national living wage earns £1,000 more this year.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
The village of Altnaharra in my constituency is the coldest place in the UK every single winter. A great number of households in my constituency rely on domestic fuel for their heating—they have absolutely no choice. Right now, they are faced with crippling bills landing on their doorsteps. I do not want the Chancellor to feel that he has to repeat himself, but could I ask in the spirit of good will and co-operation whether he will agree to my meeting some of his ministerial team to look at different ways in which we could tackle this problem, which is hurting my constituents, in the coldest part of Britain, very badly indeed?
Rishi Sunak
I am always happy to hear suggestions from the hon. Gentleman and, indeed, to arrange a meeting for him. I wanted to make sure that those off the gas grid still benefited from the energy package that we put in place in February, and it will work on electricity meters, so that will happen. As a rural MP myself, I appreciate the issue that the hon. Gentleman raises, and I will happily arrange the meeting for him.
Richard Burgon (Leeds East) (Lab)
Oil and gas giants are making £900 profit per second, while millions of people are having sleepless nights worrying about whether they will be able to heat their homes. Does the Chancellor think that the right of these firms to make these super-profits is more important than the right of people to stay warm? If not, surely now is the time for a windfall tax on these profits to fund lowering people’s energy bills.
Rishi Sunak
I just remind the hon. Gentleman that we already have a supplementary corporation tax on oil and gas companies. They pay 40% corporation tax—twice as much as the rate paid by all other companies—and it is right that they do. Going forward, as the Prime Minister’s strategy will outline, we want to see more investment in the North sea, more British energy security and more British jobs.
Ruth Cadbury (Brentford and Isleworth) (Lab)
Private sector tenants on low incomes in my constituency face ever-rising rents, which in many cases are well above local housing allowance levels. These are people on universal credit, and over half are working families who are having to make the choice of whether to heat or eat. What assessment has the Chancellor made of the levels of local housing allowance so that my constituents do not have to take £200, £300 and £400 from their non-housing element to pay their rent?
Rishi Sunak
Because of the increases to local housing allowance that this Government put in place for the pandemic, and that they have maintained, about 1.5 million people—the poorest in our society—will have £600 a year more in local housing allowance, which will help. The hon. Lady talked about a family on low income. Just so that she is aware, as a result of all the tax and welfare changes we have made, including to the taper and the national living wage, a family with two children that is renting, with one parent working full time and the other working part time on the national living wage, will be about £3,000 better off. I know that that will help them through the challenging months ahead.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Brownings the Bakers makes and sells products and distributes them right across the UK through some of the major UK supermarkets. I wrote to the Chancellor highlighting the fact that its electricity costs have increased from £4,000 a week to £11,000 a week. If it wants fixed costs, it has been offered an eye-watering £17,000 a week for a two-year contract. Obviously, the Treasury makes more money in VAT returns out of these eye-watering increases, so rather than the Chancellor having to write back to me, can he confirm to me here and now that I can tell John Gall, the managing director, that he is doing nothing to help businesses such as Brownings the Bakers?
Rishi Sunak
The hon. Gentleman is simply wrong on VAT. If he looks at the figures published today, he will see that the OBR’s estimate of VAT receipts in the forthcoming year is actually lower than the amount it had expected in the autumn. We are providing a tax cut for small businesses today—£1,000 due to the increase in the employment allowance, and that will kick in in just a couple of weeks.
Rachael Maskell (York Central) (Lab/Co-op)
As always, the Chancellor has forgotten the poorest—those claiming pensions, those claiming social security and those living below the minimum income threshold, who have been hit by the cost of living crisis. All that my poorest constituents want is food, warmth and shelter against soaring house prices. All they got was 6p a day from the housing support fund on average. Will the Chancellor go back again and review the rise in social security payments? Those people need that money, or else they will go hungry, they will experience hypothermia and they will be homeless.
Madam Deputy Speaker (Dame Rosie Winterton)
Order. It is important that the questions are very brief at this stage if I am going to get the last few people in.
Rishi Sunak
With regard to supporting those who are homeless, the spending review in the autumn increased support for homelessness by 85%, compared with 2019 levels—to over £640 million, I think, a year. We are currently seeing the number of rough sleepers at very low levels, compared with the last several years, and hopefully at the lowest level in a decade by the end of this Parliament.
Ian Byrne (Liverpool, West Derby) (Lab)
I have asked this of the Chancellor on numerous occasions. On Monday, I led a delegation to Downing Street to deliver a letter urging him to grant a right to food. With millions having to choose between starving or freezing in their homes because of the cost of living crisis, when will the penny drop with the Chancellor that hunger is a political choice, and it is he who controls the levers to eradicate it? Does he agree that it is a dereliction of his duty to the security of every household that we all serve not to enshrine into UK law access to food for all?
Rishi Sunak
We have actually invested more than £200 million a year in the holiday activity and food programme to provide both food and enriching activities to hundreds of thousands of children across the country.
Fleur Anderson (Putney) (Lab)
In Putney, 31% of children live in poverty. The biggest measure that the Chancellor could bring in is scrapping the two-child benefit cap, which is cruel and leaves children in poverty. Has he assessed the two-child benefit cap, and when will he scrap it?
Rishi Sunak
I am pleased that there are now 300,000 fewer children in absolute poverty compared with 2010. The best way to make sure that children do not grow up in poverty is to ensure that they do not grow up in a workless household, and there are 700,000 fewer of those today as a result of the actions of this and previous Conservative Governments.
Peter Grant (Glenrothes) (SNP)
The National Audit Office has found that, in a single year, Her Majesty’s Revenue and Customs allowed more than £300 million of fraudulent claims for research and development tax relief. We also know from other NAO reports that the Treasury is woefully bad at producing evidence to demonstrate that any of the tax relief policies actually deliver the required objectives. With that in mind, what assurance can we have that the announcement that the Chancellor has made today will lead to a genuine real-terms increase in R&D spend, and will not just become yet another taxpayer-funded get-rich-quick scheme?
Rishi Sunak
Government spending on R&D is increasing considerably over this Parliament, but the hon. Gentleman is right to point out some of the issues with our existing relief schemes. They do not work as well as they should. We are committed to tackling them. The final announcement will be made in the autumn for effect in the spring.
Olivia Blake (Sheffield, Hallam) (Lab)
Figures from the National Institute of Economic and Social Research have shown that destitution has more than doubled from 197,400 to over 400,000. Destitution is defined as two single people living on £100 a week after housing costs. Is the Chancellor happy that none of the announcements today will benefit those who are in destitution?
Rishi Sunak
That is categorically not the case. The policies that we have announced today will help British families up and down the country in all sorts of circumstances: we are making sure that work pays; we are supporting people into work; we are cutting the cost of fuel; and we have a plan to let our people to keep more of their own money in the years ahead. It is the right way to help people, and all the distribution analysis published today supports the fact that we are doing most for those on the lowest incomes.
Margaret Ferrier (Rutherglen and Hamilton West) (Ind)
Unpaid carers are increasingly worried about how they will afford to pay their bills. I am sure that the Chancellor will agree that they make an essential contribution to the UK. Will he set out whether he is considering any further measures to support unpaid carers?
Rishi Sunak
We are grateful to carers everywhere for the fantastic job that they do. I am confident that they and their families will benefit from the policies that we have announced today.
Jim Shannon (Strangford) (DUP)
I thank the Chancellor for the help that he has given to my constituents. However, a constituent of mine has recently been in touch to say that the removal of red diesel would see her business experiencing an unsustainable increase in the cost of sales by some £400,000 annually. I am not being churlish, but does the Chancellor agree that this increase has come at a breaking point for businesses, and will he make allowances for the continuation of red diesel until the economy gets back on its feet?
Rishi Sunak
These changes were announced two years ago. They were consulted on and there are various exemptions in place, particularly to protect agriculture, which I know will be important to the hon. Gentleman. None the less, it is right that we go ahead with the changes as legislated.
Madam Deputy Speaker (Dame Rosie Winterton)
I thank the Chancellor for his statement.
Oral Answers to Questions
Rishi Sunak Excerpts(2 years, 9 months ago)
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Steve McCabe (Birmingham, Selly Oak) (Lab)
The Chancellor of the Exchequer (Rishi Sunak)
The Government, of course, recognise that inflation is rising and are closely monitoring the situation together with the Bank of England. We are also putting in place policies to help families meet the rising cost of living, such as freezing duties, cutting the tax rate in universal credit and increasing the national living wage. Last month I announced to this House a £9 billion package of support to help households with rising energy bills.
Kim Johnson
The question was about what assessment has been made. The Resolution Foundation predicts that inflation will rise above 8% but benefits will increase by only 3%. Liverpool has some of the most deprived communities in this country, with 33% of children in my Riverside constituency suffering poverty. Does the Chancellor believe that now is not the time to increase national insurance contributions while the cost of living is increasing, forcing people into poverty at the highest level since the 1970s? Will he commit to putting measures in place in the spring statement?
Rishi Sunak
The hon. Lady talks about children in poverty, and I am pleased that there are now 300,000 fewer children in poverty than in 2010 thanks to the actions of Conservative-led Governments. We all know that the best way to ensure the children do not grow up in poverty is to ensure that they grow up in a house where people work, and that is why I was delighted this morning to learn that there are record numbers of people on payroll.
Gerald Jones
Citizens Advice has told me that one in six people in my constituency of Merthyr Tydfil and Rhymney are unable to pay their energy bills right now, and that is before they spike next month and before the Chancellor’s national insurance hike. Some 86% of people said that they did not think that the October energy loan scheme would make a difference in helping to pay their bills. The conflict in Ukraine will inevitably lead to a further surge in energy prices, so if he will not accept Labour’s suggestion of a windfall tax on oil and gas producers, what exactly will the Chancellor do now to relieve the pressures on people in my constituency and across the country?
Rishi Sunak
We are putting in place support to help households meet the rising cost of energy bills, and £9 billion of support will help to ensure that four out of five households in England will receive £150 starting this April, with a further £200 of support towards the autumn. Of course, councils have been given extra money for discretionary funding to help households in need as well.
Ms Rimmer
Since the Chancellor announced his household loan scheme in response to the energy crisis as well as a huge rise in national insurance, the world has changed. Other Departments have adapted to the Russian invasion of Ukraine. When will the Treasury?
Rishi Sunak
With regard to the Russian invasion of Ukraine, the Treasury has been hard at work with our international partners to put in place the most comprehensive set of economic sanctions that this country has ever had and that Russia has ever experienced. I am very proud of the job we have done.
Steve McCabe
If the Chancellor had appreciated last autumn the extent to which energy costs and other household bills would rise, would he still have advocated a national insurance rise?
Rishi Sunak
We have reacted to rising energy bills by putting in place £9 billion of support, which will get to households far faster than the proposals put forward by the Opposition, with the £150 reaching four out of five households just this April when the price cap goes up. It is also worth bearing it in mind that, because of the price cap, households will be protected from further increases all the way through to the autumn.
Jake Berry (Rossendale and Darwen) (Con)
The cost of fuel is now an eye-watering £2 a litre in some areas, which has led to a huge VAT windfall for the Treasury. When the Chancellor thinks about his spring statement, will he look not just at cutting fuel duty but at mileage recovery rates? They have been at 45p a mile for more than a decade. Now is the time to put them up to 60p at least.
Rishi Sunak
I am grateful to my right hon. Friend for his suggestions, and of course I will bear them in mind. He is right about the rising cost of fuel at the pumps, although I am pleased to see that over the last few days, the price of Brent has fallen by about 25%, illustrating the volatility of the situation.
Fay Jones (Brecon and Radnorshire) (Con)
The cost of living is biting hard in Brecon and Radnorshire. Heating oil is eye-wateringly expensive and extremely hard to come by, while a local haulage firm in Llandrindod Wells is coughing up an extra £60,000 per month on diesel. It is wrong to assume that those who live in rural areas are wealthy enough to withstand these pressures, so can my right hon. Friend reassure my constituents that he has them in mind as he considers all the options available to him?
Rishi Sunak
I can give my hon. Friend that reassurance. Representing as I do a rural constituency like hers, I know the difficulty that our constituents are facing. That is why our £9 billion package of support for energy that I announced earlier is done by electricity meter, ensuring that those who are off the gas grid also benefit.
Mr Mark Harper (Forest of Dean) (Con)
The impact on energy prices of the Russian invasion of Ukraine and the sanctions will inevitably mean that Britain is poorer. There is nothing that we can do about that overall, but we can help to smooth the impact. I welcome the announcement this morning that there are 275,000 extra people on payroll. What more can the Chancellor do to improve companies’ ability to hire workers and to enable people to keep more of their own money; for example, through the reduction in the taper rate on universal credit?
Rishi Sunak
I am grateful to my right hon. Friend for his typically thoughtful question. He is absolutely right about the circumstances we face. The data this morning shows record numbers of people on payroll, and that is to be welcomed. Indeed, the unemployment rate is now back to the levels we saw before the pandemic, thanks to our plan for jobs. There are record vacancies, and we want to get people into work. The best way to do that is to give them the skills they need and cut taxes to increase incentives. That is exactly what this Government are doing, and I expect us to make more progress in the months ahead.
Harriett Baldwin (West Worcestershire) (Con)
With council tax being one of the biggest items in household budgets, could the Chancellor remind the House which party tends to be the best, in a local council, for setting council tax?
Rishi Sunak
My hon. Friend makes an excellent and timely point. She knows that I know that, in this country, if people want good local services delivered for the lowest possible council tax, they need to vote Conservative.
Mr Speaker
You should not make the Chancellor blush.
I call the shadow Minister, Pat McFadden.
Mr Pat McFadden (Wolverhampton South East) (Lab)
The package on energy announced by the Chancellor last month has already been rendered obsolete by Russia’s invasion of Ukraine. Some estimates of average annual household energy bills suggest that there will be rises to £3,000 or even more from October. That is a ruinous figure for many of our constituents. Will the Chancellor revisit this support package in next week’s spring statement, and will he reconsider his refusal to fund help for hard-pressed households through a windfall tax on the enormous profits that oil and gas companies are making?
Rishi Sunak
It is worth bearing it in mind that, because of the price cap, households will be protected all the way through the autumn. We do not know what the price cap will be at that point. If the right hon. Gentleman knows, he is probably in the wrong line of business, and it would be good if he could tell the rest of us. Regarding a windfall tax, Conservative Members believe in getting more investment into the North sea and exploiting our domestic resources. The roundtable that my right hon. Friends the Chief Secretary to the Treasury, the Prime Minister and the Business Secretary hosted yesterday showed that there is enormous appetite to invest more in the UK. A windfall tax would put off that investment.
Mr McFadden
Of course, there are global factors driving up energy prices and inflation in many countries, but what singles out the UK is this Government’s decision to impose a tax rise on working people right when the impact of rising energy bills is hitting people the hardest. Why are the Government so determined to make the cost of living crisis worse now with these tax rises, particularly when the Treasury is briefing anyone—including the Government’s own Back Benchers—who will listen that the Tory party is planning pre-election tax cuts?
Rishi Sunak
The right hon. Gentleman talks about exceptionalism with regard to policy. Part of the reason we are in this situation with energy prices is the decisions made by the previous Labour Government, in particular on nuclear energy, which we are now rapidly having to make up for. We are also committed to tackling the unprecedented backlogs in the NHS, getting the waiting lists down, and recovering from covid. Every single penny of the health and social care levy will go to the people’s No. 1 priority and, although things are difficult, I know that is what people want to happen.
Derek Thomas (St Ives) (Con)
I represent an area in Cornwall where a large number of people are on the state pension. I know, from conversations that I have had with the Chancellor, that he is particularly concerned about that demographic. Given the critical rise in the cost of living, I wonder whether one of the easier routes to address it would be to reinstate the triple lock for next year.
Rishi Sunak
My hon. Friend is right to highlight pensioners and to support them in the way that he does. He will know that we made a decision temporarily to move to a double lock this year because of the anomaly in the reported earnings, which would have meant a very large rise statistically that would not have been justified or fair in the circumstances. That said, I am pleased to say that pensions are now at their highest level relative to earnings in over three decades because of the Government’s policy on the triple lock, and we continue to be the party that will support those who need our help.
Alison Thewliss (Glasgow Central) (SNP)
Sanctions against Putin’s regime are absolutely necessary, but they will add an extra layer of economic harm on top of the existing Tory cost of living crisis. The Chancellor must use the upcoming spring statement to deliver an emergency package of support to householders and businesses, whose costs have spiralled out of control. Will he turn his buy now, pay later energy loan into a grant, reinstate the universal credit uplift, increase other benefits with inflation and scrap the VAT and national insurance hike that will damage so many people?
Rishi Sunak
What we are doing is tackling the cost of energy. Unlike the hon. Lady’s party, we believe in the future of the North sea and we are investing in it. We want to make sure that we promote the jobs that are there. On upcoming support for energy costs, the Scottish Government have plenty of powers on welfare and tax, and if they think that they can make a difference, they should use them.
Andy Carter (Warrington South) (Con)
The Chancellor of the Exchequer (Rishi Sunak)
In response to Russia’s unprovoked aggression against Ukraine, the Treasury has helped deliver a world-leading package of economic sanctions to deliver severe consequences to the Russian economy. Across insurance, finance, trade, public and private capital markets, clearing, SWIFT, central bank assets and, indeed, bank asset freezes, we are ensuring that the Government play a leading role in making sure that Putin’s aggression does not go unpunished.
Marsha De Cordova
Families in my constituency are facing the cost of living crisis, and the planned real-terms cut to social security will force more of them into poverty and into having to make impossible decisions between eating and heating their home. According to the Trussell Trust, one in three on universal credit were not able to dress for the weather last month as they could not afford appropriate clothing or shoes. That is unacceptable. Will the Chancellor increase the level of social security support in his spring statement next week to alleviate some of the worst impacts of the cost of living crisis?
Rishi Sunak
As is common to all other years, welfare is uprated annually by September’s CPI. That will be the case next year as well, as my right hon. and learned Friend the Financial Secretary laid out. For those on universal credit we have cut the tax rate to ensure that work pays, delivering a £2 billion tax cut to 2 million on low incomes—the best route out of poverty.
Giles Watling (Clacton) (Con)
Rishi Sunak
My hon. Friend is right to point out the importance of fuel as a cost for both businesses and households. That is why I am proud that we delivered the eleventh freeze in fuel duty in a row. That has delivered huge savings for households and businesses over the past several years.
Rachel Reeves (Leeds West) (Lab)
Millions of people are worried sick about soaring bills. Meanwhile, BP says it has more cash than it knows what to do with and has compared its record profits from inflated prices to a cash machine. Those profits are not being used to fund new investment. They are going on dividends and share buybacks, so why will the Chancellor not make North sea oil and gas companies pay their fair share of taxes to tackle the enormous cost of living crisis?
Rishi Sunak
The hon. Lady talks about a fair share. It is worth bearing in mind that oil and gas companies are already taxed at double the rate of all other companies: 40% versus 19%, currently. Last year saw the lowest amount of investment in the North sea on record—just a few billion pounds. As my right hon. Friends who were at the roundtable yesterday know, there are billions of pounds of projects waiting to be unlocked. We want that investment and those jobs here in the UK.
Rachel Reeves
That is not happening with the share buybacks. The Chancellor is totally out of touch. He does not seem to understand how the cost of living crisis is affecting the least well off in society, as campaigner Jack Monroe highlighted. The Institute for Fiscal Studies confirmed that the poorest households face an inflation rate 50% higher than the richest households. The Resolution Foundation warns that between 2020 and 2022, 700,000 more children will have fallen into poverty. That is devastating, but it is not inevitable. The Chancellor can and must do more in the spring statement to provide people with real help, not just a loan. Why is he so intent on shielding oil executives, instead of protecting the poorest in society?
Rishi Sunak
The best way to help people cope with rising energy costs and bills over time is to make sure we have a diversified and secure supply of energy, more of which comes from here at home. I share the hon. Lady’s concern for those on the lowest incomes. I am proud that all the evidence points to the fact that the decisions made by this Government over the last few years have benefited those on the lowest incomes the most. We have protected those who need our help, and we will continue to do so.
Andrew Bridgen (North West Leicestershire) (Con)
Vicky Foxcroft (Lewisham, Deptford) (Lab)
Rishi Sunak
We are spending record amounts on supporting those who are disabled. Relative to the OECD, I think we are spending in excess of the average for other leading countries. My right hon. Friend the Secretary of State for Work and Pensions has a particular programme of support in place to help those who are disabled to move into employment; plans were announced earlier this year.
John Penrose (Weston-super-Mare) (Con)
Owen Thompson (Midlothian) (SNP)
It is estimated that the Chancellor’s smash and grab on national insurance will raise £13 billion. By happy coincidence, at the end of the financial year the Chancellor will have an extra £13 billion-worth of borrowing, because the Government have not met the borrowing expectations. Will the Chancellor use that happy coincidence to scrap the tax on jobs?
Rishi Sunak
The forecast for the public finances will be updated next week. As for jobs, I am happy to confirm that, according to today’s figures, there are record numbers of people on payrolls, record numbers of vacancies, and, indeed, more people in work now than before the crisis—and the unemployment rate is now lower than, or at the same level as, it was before coronavirus hit.
Mr David Davis (Haltemprice and Howden) (Con)
The Government have repealed many of the powers in the Coronavirus Act 2020, but they have not repealed the Act itself. This means that the Treasury can still order Her Majesty’s Revenue and Customs to start support schemes such as furlough without recourse to Parliament. Control of expenditure is Parliament’s first responsibility, so are the Government going to repeal the Act in total, or will the Treasury take action to give the proper powers back to Parliament?
Rishi Sunak
I would be very happy to look into the matter that my right hon. Friend raises.
Economic Update
Rishi Sunak Excerpts(2 years, 10 months ago)
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The Chancellor of the Exchequer (Rishi Sunak)
The UK’s economic recovery has been quicker and stronger than forecast. In the depths of the pandemic, our economy was expected to return to its pre-crisis level at the end of 2022; instead, it got there in November 2021, a full year earlier. Unemployment was expected to peak at nearly 12%; instead, it peaked at 5.2% and has now fallen to just over 4%, saving more than 2 million jobs. With the fastest-growing economy in the G7 this year, with over 400,000 more people on payrolls than before the pandemic, and with business investment rising, it is no wonder that borrowing is set to fall from £320 billion last year—the highest ever peacetime level—to just £46 billion by the end of this Parliament. As we emerge from the depths of the worst recession in 300 years, we should be proud of our economic record. The economy is stronger because of the plan we put in place, because of the actions we took to protect families and businesses, and that plan is working.
However, for all the progress we are making, the job is not yet done. I know that right now, the No. 1 issue on people’s minds is the rising cost of living. It is the independent Bank of England’s role to deliver low and stable inflation, and the Governor will set out its judgments at midday today. Just as the Government stood behind the British people through the pandemic, so we will help people deal with one of the biggest costs they now face: energy. The energy regulator Ofgem announced this morning that the energy price cap will rise in April to £1,971, an increase of £693 for the average household. Without Government action, this would be incredibly tough for millions of hard-working families, so the Government are going to step in to directly help people manage those extra costs.
Before I set out the steps we are taking, let me explain what is happening to energy prices and why. People’s energy bills are rising because it is more expensive for the companies that supply our energy to buy oil, coal and gas. Of the £693 increase in the April price cap, around 80% comes from wholesale energy prices. Over the past year, the price of gas alone has quadrupled, and because over 85% of homes in Britain are heated with a gas boiler and around 40% of our electricity comes from gas, this is hitting households hard. The reasons gas prices are soaring are global: across Europe and Asia, a long, cold winter last year depleted gas stores. Disruption to other energy sources, such as nuclear and wind, left us relying more than usual on gas during the summer months. Surging demand in the world’s manufacturing centres in Asia, at the same time that countries such as China are moving away from coal, is further increasing demand for gas, and concerns about a possible Russian incursion into Ukraine are putting further pressure on wholesale gas markets. So prices are rising.
The price cap has meant that the impact of soaring gas prices has so far fallen predominantly on energy companies—so much so that some suppliers that could not afford to meet those extra costs have gone out of business as a result. It is not sustainable to keep holding the price of energy artificially low. For me to stand here and pretend we do not have to adjust to paying higher prices would be wrong and dishonest, but what we can do is take the sting out of a significant price shock for millions of families by making sure that the increase in prices is smaller initially and is spread over a longer period.
Without Government intervention, the increase in the price cap would leave the average household having to find an extra £693. The actions I am announcing today will provide, to the vast majority of households, just over half of that amount—£350. In total, the Government are going to help about 28 million households this year. Taken together, this is a plan to help with the cost of living worth about £9 billion.
We are delivering that support in three different ways. First, we will spread the worst of the extra costs of this year’s energy price shock over time. This year, all domestic electricity customers will receive an up-front discount on their bills worth £200. Energy suppliers will apply the discount on people’s bills from October, with the Government meeting the cost in full. That discount will automatically be repaid from people’s bills in equal £40 instalments over the next five years. This is the right way to support people while staying on track with our plans to repair the public finances.
Because we are taking a fiscally responsible approach, we can also provide more help faster to those who need it most—the second part of our plan. We are going to give people a £150 council tax rebate to help with the cost of energy in April, and this discount will not need to be repaid. I do want to be clear with the House that we are deliberately not just giving support to people on benefits. Lots of people on middle incomes are struggling right now too, so we have decided to provide the council tax rebate to households in bands A to D. This means that about 80% of all homes in England will benefit.
The third part of our plan will provide local authorities with a discretionary fund of nearly £150 million to help those lower-income households who happen to live in higher council tax properties, and households in bands A to D who are exempt from council at all.
We are also confirming today that we will go ahead with existing plans to expand eligibility for the warm home discount by almost a third, so that 3 million vulnerable households will now benefit from that scheme. That is not all we are doing to help vulnerable households. We are providing £3 billion over this Parliament to help more than half a million lower-income homes become more energy efficient, saving them on average £290 a year; increasing the national living wage to £9.50 an hour in April—a rise of over £1,000 for 2 million low-paid workers; and providing an effective tax cut for those on universal credit, allowing almost 2 million households to keep an average of £1,000 per year.
The payment through energy suppliers will apply across England, Wales and Scotland. Energy policy is devolved in Northern Ireland, with a different regulator, and the Government do not have the legal powers to intervene, but we will make sure that the Executive are funded to do something similar, with about £150 million for Northern Ireland through the Barnett formula next year. Because the council tax system is England-only, total Barnett consequentials of about £565 million will be provided to the devolved Administrations in the usual way.
I know that some in this House have argued for a cut in VAT on energy. However, that policy would disproportionately benefit wealthier households. There would be no guarantee that suppliers would pass on the discounts to all customers, and we should be honest with ourselves: this would become a permanent Government subsidy on everyone’s bills, a permanent subsidy worth £2.5 billion every year, at a time when we are trying to rebuild the public finances. Instead, our plan allows us to provide more generous support, faster, for those who need it most, providing 28 million households with at least £200, and the vast majority receiving £350. It is fair, it is targeted, it is proportionate: it is the right way to help people with a spike in energy costs.
Today’s announcements are just one part of the Government’s plan to tackle the country’s most pressing economic challenges. It is a plan for growth, with record investment in infrastructure, innovation and skills; a plan to restore the public finances, with debt falling by the end of this Parliament; a plan to cut waiting lists and back the NHS with £29 billion over three years, and with a permanent new source of funding; and, with the measures that I have announced today, a plan to help with the rising cost of energy, with £350 more in the pockets of tens of millions of hard-working families. That is our plan to build a stronger economy, not just today but for the long term, and I commend it to the House.
Rachel Reeves
Can the Chancellor confirm how many people who are fuel-poor will miss out on council tax support compared with the warm home discount support that Labour has announced?
The Government had a choice. Only today, Shell announced that its profits have quadrupled to $20 billion. It described its results as “momentous”—dividends up, profits up, and people’s energy bills up too. Labour’s plan would impose a one-off windfall tax on those excess profits, but this Chancellor would rather shield the oil and gas producers while at the same time loading the cost on to working people and pensioners. Cabinet Ministers have described the oil and gas producers as “struggling”. Tell that to the one in five people who are already skipping meals so they can pay their energy bills.
This energy crisis has not happened overnight. A decade of dither and delay from the Conservative party has brought us to this point: a decade of failure to regulate our energy markets; a decade in which they have slashed our gas storage capacity, leaving us more reliant than ever on Russia for our gas imports; a decade of failure to make the most of solar, tidal and wind energy; and a decade of stalled progress on insulating our homes to keep bills low, not just for one year but into the future. It has been the Tory decade that has led to this announcement of the biggest increase in the price of domestic energy since records began. That is what the Chancellor should acknowledge and apologise for today. The Conservatives are not solving the cost of living crisis, because the Conservatives are the cost of living crisis.
Rishi Sunak
The Opposition may have some soundbites but they certainly do not have a policy. [Interruption.] In contrast, this Government have announced measures—[Interruption.]
Mr Speaker
Order. Mr Seely, is there something wrong with that wood you keep knocking, because I think it is in good order? You do not need to test for woodworm.
Rishi Sunak
In contrast, this Government have announced measures to share the burden with consumers and help manage the global price rise. Despite the faux outrage from the Opposition Benches, I am sure that even they would admit privately that the support just announced is both generous and comprehensive.
Let me take some of the hon. Lady’s points in turn. First, on VAT, may I say how very welcome it is that the Opposition are recognising the benefits of Brexit? I hope they will join me in celebrating the fact that we have been able to change mass migration to this country after decades, that we can create new freeports in places such as Teesside, that we can sign new free trade deals, and that we can deregulate our economy to drive faster growth. She talked about VAT. VAT will, on average, be worth £90 to every household. We are providing £150 to those households that really need it and delivering that support quicker.
Secondly, the hon. Lady tried to claim that it was the Government’s responsibility to manage global gas prices. I outlined in my statement that it is very clear, as any person looking at this sensibly will acknowledge, that global factors are causing the increase in gas prices. No British Government or Chancellor can change what is happening in Asia or, indeed, stop a nuclear power plant going offline in Germany, and the hon. Lady should acknowledge that. Even in places such as Norway, electricity bills are rising because global factors are in play. She would do well to acknowledge that—and the right hon. Member for Doncaster North (Edward Miliband), sitting next to her, will know that, having spent a lot of time on this.
Thirdly, I want to address the point about our support for the most vulnerable, because I am proud of this Government’s record in supporting those who need our help. The policies we have announced today are progressive in their nature. A flat rate will, of course, mean far more to those on lower incomes or with lower energy bills. It is worth five times as much as a percentage of income for those in the lowest incomes as for those on the highest incomes. The hon. Lady talked about insulation. Over this Parliament, we are spending £3 billion to improve energy efficiency and insulation for over half a million households in fuel poverty. That is the right thing to do and it will save those vulnerable families, on average, £300 a year, not just this year but every year going forward. We have already announced those plans.
Lastly, to address the hon. Lady’s point on a windfall tax, of course that sounds superficially appealing, but we on the Government Benches deal with complex problems in a responsible way. The obvious impact of a windfall tax would be to deter investment—it is as simple as that. At this moment I want to see more investment in the North sea, not less. Last year we saw the lowest amount of investment on record in the North sea, as my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy pointed out just the other day. There are £11 billion of projects lined up to go. I want to unlock that investment because that is good for this country, good for British jobs and good for our energy security.
We will pursue policies that are good for the interests of this country not just today but in the future. My right hon. Friend the Energy Secretary is working very hard to make sure we have an energy market that is fit for the future. We have made investments in nuclear, which, as he rightly pointed out, were ignored by the Labour party when it was in power, but which we are now fixing.
In conclusion, I am not blind to the challenges we face. I have to say to the hon. Lady and her colleagues, however, that we on this side of the House did not have the luxury of sitting on the sidelines and throwing stones. Faced with the gravest of crises, this Government chose to protect millions of jobs. We chose to support millions of businesses, we chose to invest in a world-leading vaccination programme, and we chose a balanced approach to covid so we could open up faster than anywhere else in Europe. We did those things at record speed and at a time of great uncertainty, and we will always strive to learn from mistakes. Nothing is ever perfect when responding to a crisis, but I say to the Labour party that there is a fine line between reasonable criticism and political opportunism, and in my experience the British people can always tell the difference.
Kevin Hollinrake (Thirsk and Malton) (Con)
I welcome my right hon. Friend’s announcement today. Does he agree that a cut in VAT to solve this crisis is a completely flawed policy, as evidenced by the three economists who spoke to the Treasury Committee this week, including Torsten Bell from the Resolution Foundation, who wanted something far more targeted, such as what my right hon. Friend has announced today? It is clear that one factor in this crisis is Russia’s willingness to weaponise its gas supplies. Will he confirm that if there is any incursion into Ukraine, this country, with our international allies, will look at weaponising our banking system, which would be economically catastrophic for Russia?
Rishi Sunak
I thank my hon. Friend for his question. On VAT, I have nothing further to add. He is right; what we are doing is more targeted, faster and more generous to those who need our help. With regard to sanctions on Russia, I can assure him that absolutely nothing is off the table. We are working closely with our international partners, as the Foreign Secretary has outlined, to prepare a very robust package of sanctions.
Alan Brown (Kilmarnock and Loudoun) (SNP)
The Chancellor brags about having the fastest recovery, but that is actually wrong because Italy, for a start, has a higher growth rate. If the economy is doing so well, why is he still introducing a £12 billion tax on workers this financial year? Why has it taken to the last minute to try to do something about the cost of living crisis? Why is so much of this measure actually a loan that bill payers will have to pay back? He talks about not doing a VAT cut because he wants a more targeted approach. How is giving everybody a rebate a targeted approach? It is illogical.
The reality is that the Treasury is currently raking it in compared to where it thought it would be in the March 2021 Budget: an extra £3 billion this financial year and next year from oil and gas revenues; and VAT receipt predictions in October last year were nearly £40 billion higher than what they were in March 2021. That is a lot of money that the Treasury could be freeing up. Meanwhile, average energy bills increased this year to nearly £1,200, up from £700 the year before, bringing in an extra £0.6 billion in VAT. The VAT increase due to the cap rise will bring the Treasury another £0.8 billion a year, so there is much more money it could free up.
The Scottish Government are bringing in a £20-a-week child payment and uprating the child winter assistance payment. Could the Chancellor not look at doing something similar? Will he confirm that the council tax rebate proposal he is bringing in will have Barnett consequentials, how much they will be and that they will go to the Scottish Government? Will he look at devolving further budgets and powers so that Scotland can take a more targeted approach?
National Energy Action estimated that increasing the cap would put 6 million people into fuel poverty. With the Chancellor’s measures, what impact assessment have the Government done of how many households will be in fuel poverty? How many more premature deaths will there be because people are in fuel poverty? Lastly, the highlands of Scotland generate electricity and send it to the rest of the UK, yet electricity users in the highlands on the restricted meters pay 4p a unit more for electricity, or £400 more on their bills. When will the Treasury and the Department for Business, Energy and Industrial Strategy work with Ofgem to remove that ridiculous surcharge for ageing people in the highlands?
Rishi Sunak
I am happy to confirm to the hon. Gentleman that the Barnett consequentials for Scotland will be around £290 million, which I hope he will welcome. My right hon. Friend the Chief Secretary to the Treasury will be speaking to Kate Forbes later today to go over the details, and I very much hope that the Scottish Government will choose to do something very similar to what we are doing, to the benefit of Scottish citizens. Of course, Scottish citizens will benefit from the rebate scheme on bills, because that is a Great Britain-wide policy, as I outlined.
With regard to the hon. Gentleman’s broader points on the North sea, there is a clear point of difference between us on the Government side of the House and the SNP. We believe in the future of the North sea, in the oil and gas industry, and in the 200,000 jobs it supports, and we want to ensure it plays an important part in our transition to net zero. I hope he can see that that is the right thing for Scotland and will join us in supporting that very important industry.
Lucy Allan (Telford) (Con)
I thank my right hon. Friend for his excellent statement, and particularly for the thoughtful and progressive nature of the actions he plans to take. Does he agree that it is right to help not only the poorest, but those on middle incomes who are struggling with their household budgets?
Rishi Sunak
My hon. Friend is absolutely right; I know that is something she is perhaps bringing up on behalf of her constituents. A price increase of this magnitude impacts almost everybody, and it is right that our response therefore helps almost everybody. That is what we are doing: ensuring that those families who are working hard on household incomes of £40,000 or so will still get £150-worth of support. Four out of every five households will benefit. We are on the side of hardworking families like those, and I make no apology for it.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I see we now have the Klarna Chancellor—“Get it now, pay later.” There is an important issue with council tax: in areas such as mine and other parts of London, there are not many people in those bands, and certainly not in bands A to C. Who will fund the council tax rebate? Will it be fully funded by the Exchequer, and will there be a weighting of the £150 million fund to areas such as mine, where there are poor households in high-value properties?
Rishi Sunak
Just to confirm for the hon. Lady, it is council tax bands A to D, so it is four out of every five households across England. Obviously, that will vary by region. I can confirm that it will be fully Exchequer-funded and, on top of that, there will be a discretionary fund of around £150 million, for which the Department for Levelling Up, Housing and Communities will decide the best allocation formula. Local authorities will be able to use that to help those low-income households that happen to live in higher council tax band properties and those people, such as students, who are exempt from paying council tax at all, but whom we would want to get that support to.
Mr Peter Bone (Wellingborough) (Con)
Conservatives believe in holding taxes down and putting more money in people’s pockets so that they can decide how to spend it. Socialists believe in raising taxes and then choosing to give it back, in the form of discounts and rebates, to selected people who the Government think need them. Could the Chancellor explain his approach in increasing national insurance contributions and then handing money back to different people through rebates and discounts? Is that a Conservative approach, or is it a socialist approach?
Rishi Sunak
With the greatest respect to my hon. Friend, I also believe that it is a Conservative approach to be responsible with this nation’s public finances. I believe that, after recovering from the worst economic shock in 300 years, where borrowing spiralled to levels that we have not seen since world war two, it is right and responsible to tackle that and get our borrowing and debt down to sustainable levels. That is why I have had to make difficult decisions, but also fund the country’s No. 1 priority: the NHS and the unacceptably high and growing number of people waiting for operations. That is what that funding will do. It is right that we provide a secure, long-term, sustainable funding stream for the country’s No. 1 priority, and people should be reassured that every penny of that levy is going to go to the thing that they care most about.
Stephen Timms (East Ham) (Lab)
There is an obvious unfairness in the massive profits being made by the oil and gas companies at a time when families are facing such great hardship. Surely the Chancellor must make an intervention to address that. He has announced a discretionary fund for local councils. Worried families will have no idea how much that will benefit them, if at all. Will he instead introduce an uplift in universal credit, having cut it so unfairly just four months ago?
Rishi Sunak
It is worth pointing out that the energy companies that the right hon. Gentleman talks about are already subject to a far higher rate of corporation tax. In fact, at 40% versus 19%, it is double the rate of corporation tax that other companies pay. I will not repeat my earlier arguments about the windfall tax.
We believe that the right way is to make sure that people can keep more of what they earn, which is why we cut the universal credit taper rate by 8 percentage points. That is a £2.2 billion tax cut that will benefit 2 million of the lowest paid people in our society. It is making working pay, it is strengthening incentives to work, it is the right policy and it is a Conservative policy.
Esther McVey (Tatton) (Con)
Many families across the country will struggle with their energy bills this year, so I am grateful that we have a Chancellor who is in touch with that. Will he commit to continuing to ensure that those in middle Britain, as well as those on the very lowest incomes, are supported by this Government?
Rishi Sunak
My right hon. Friend is absolutely right and I can give her that reassurance. I hope that today’s announcements will provide her with the confidence she needs that both I and this Government are committed to being on the side of those hard-working families, whom she does an enormous amount to represent and champion in this House.
Florence Eshalomi (Vauxhall) (Lab/Co-op)
The Chancellor said that energy suppliers will apply the discount on people’s bills from October. Vauxhall constituents contact me almost daily, including residents who live in properties that are too cold to heat and residents pleading for help to get repairs done. Current data suggests that more than 8,000 households in Vauxhall already live in fuel poverty. What does the Chancellor have to say to my constituents who are already unable to make ends meet and who face a hike of over £700 in their energy bills?
Rishi Sunak
What I can tell them is that they will not have to wait until October, as the Labour party’s proposals would have had them do. They will receive £150 in April, and then in October they will receive the rebate on their bills at a time when the energy price cap will be looked at again. So it is appropriate that there is further action to provide support then. That is why this policy is the right policy. By using the council tax system, we can get money to people faster—£150 in April for the hon. Lady’s constituents.
Matt Hancock (West Suffolk) (Con)
I welcome this smart set of measures. We must retain fiscal discipline; otherwise the problem will get worse rather than better. On monetary policy, the Chancellor mentioned the independence of the Bank of England decision, which has just been announced, but there is some chatter about working in tandem with the Bank. Will he confirm that, on monetary policy—not just interest-rate setting but the withdrawal of quantitative easing—Bank independence will be respected?
Rishi Sunak
I can give my right hon. Friend that assurance. It is absolutely right and proper that the Bank is independent of Government on matters of monetary policy. That is exactly what has always been the case over the past two years and it will continue to be the case. I can wholeheartedly give him that assurance.
Nick Smith (Blaenau Gwent) (Lab)
The Chancellor will be pleased that his campaign team are behind him today. Does he really think that the super-profits of $20 billion made by Shell are untouchable? His hands-off approach will not persuade many people across our country.
Rishi Sunak
What millions of people across this country will see today is a Government who are on their side and a Government taking action to help them with the anxiety they feel about rising energy bills. We are doing it in a proportionate, fair, targeted and responsible way to protect people not just today, but for years.
Sir Robert Buckland (South Swindon) (Con)
Thousands of families in Swindon and millions of households across the country will welcome the immediate help on council tax that the Chancellor has announced today in his welcome statement. Does he agree that the cod analysis we heard from the hon. Member for Leeds West (Rachel Reeves) about the energy market in Europe is demonstrable evidence of the paucity of the Labour party’s approach to energy? Is not our approach to a zero-carbon economy—one based upon energy security—going to be the way we deliver our country out of these short-term problems?
Rishi Sunak
As ever, my right hon. and learned Friend makes an excellent point; he is absolutely right and I agree wholeheartedly with him. He will know that my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy is working very hard to undo some of the mistakes that the Labour party made in the past.
Chris Bryant (Rhondda) (Lab)
I know that the Chancellor is all pumped up, but this is pretty puny stuff, to be honest; £350 is not going to touch the sides of the problem for my constituents. Gas and electricity are up for the average family in my constituency by £686; fuel is up by £314; the average weekly shop is up by £385; universal credit has been cut by £1,040; national insurance is up by £150; and frozen tax allowances—frozen by him—will cost another £300. That makes £2,875, in a constituency where the average wage is £27,000. That is really going to cause hardship and £350 does not even touch it.
Rishi Sunak
The Labour party has proposals that would give considerably less to many people, so it is a bit rich to hear that. The hon. Member had a long list of numbers. I also have one: 400,000 more people on the payroll than there were before the crisis; 2 million jobs saved because of the actions of this Government; the national living wage going up by £1,000 a year in April; and a £1,000 tax cut for millions of people on universal credit. Those things are what we are doing to put more money into people’s pockets when they need it, and they can rely on us to continue supporting them not just now, but for days and years into the future.
Mr Mark Harper (Forest of Dean) (Con)
First, I thank the Chancellor for coming to the House to make his statement before he does a press conference. That is the right order of priorities. I also thank him for engaging with Conservative colleagues, listening to their concerns and responding to them in his statement. Finally, may I highlight the realism and honesty with which he has grappled with global gas prices? We cannot pretend that they have not gone up and what he has done is set out a package to smooth the impact for everybody and to help those on the lowest incomes. That is the right approach and it demonstrates why we have got it right and the Labour party is not fit for office.
Rishi Sunak
My right hon. Friend is absolutely right. Those of us in government make responsible decisions and we are honest with people. I think people respect that honesty and it is the right thing for us to do. He is right that there is a global surge in gas prices and it would be wrong to pretend that we do not have to adjust to that, but what we can do is take the sting out of that adjustment, spread its impact over time and limit its immediate impact. That is the right and responsible approach and I am grateful for his support on that plan.
Naz Shah (Bradford West) (Lab)
The Chancellor comes here and says he is proud of his record. Let me tell him what my constituents think of his record. The Conservative party cut £20 a week from universal credit and was dragged here kicking and screaming for U-turn after U-turn just to feed poor and hungry children. This £350 does not cut it when the Chancellor has wasted billions. More than £6 billion went on wasted personal protective equipment and more than £4.7 billion has been lost to fraud in respect of covid funds. The Chancellor brings £9 billion here when he has lost £12 billion. It does not quite cut it for my constituents, who do not trust this Government because they are not helping my constituents. Those at the bottom end are the ones being hit the most. This does not even come near the £700, let alone the cost of living.
Rishi Sunak
The hon. Lady talks about universal credit; this Government provided the extra support for people when they needed it during the crisis. All the data and evidence show that throughout the worst of the depths of this pandemic the Government’s actions helped those on the lowest incomes the most. That is a record of which I am enormously proud.
Robert Halfon (Harlow) (Con)
I realise that to the champagne socialists on the Opposition Benches £350 is not a lot of money, but my right hon. Friend knows that I care deeply about this issue. My constituents are just about managing but this is a cost of living package for white van men and women throughout the country, including in my Harlow constituency. Will he continue to do everything he can to focus on the just-about-managing group of people who make up my constituents, and make sure that the Government continue to cut the cost of living for hard-working families?
Rishi Sunak
I am grateful for my right hon. Friend’s support. He rightly champions those people who are just about managing and who work incredibly hard to build a better life for themselves and their families. They should know that this Government are on their side. I thank him very much for his support and we will continue to champion those people.
Christine Jardine (Edinburgh West) (LD)
The Chancellor’s plans play Russian roulette with taxpayers’ money, gambling that prices will go down, rather than providing a real solution to help families to avoid skyrocketing bills. It is just delaying the pain while he increases taxes by £600 a year for the average household. Why will he not listen to the Liberal Democrats’ suggestion of a package that would help families to reduce their bills by £1,000 a year? Surely it is time to admit that he has got it wrong. It is time to scrap the Conservative tax hikes.
Rishi Sunak
We have not heard from the hon. Lady’s party any plan to provide the funding that the NHS needs. We all know that the NHS is grappling with the recovery from covid. There is an unprecedented scale of backlogs to work through and the social care system needs urgent reform. The only way to grapple with those challenges is to provide the NHS and social care with a sustainable source of funding. That is what we are doing, it is the responsible and right approach, it is the progressive approach, it will benefit people in Scotland, Wales and Northern Ireland as well as England, and in the long run it will be the right thing for this country.
Alun Cairns (Vale of Glamorgan) (Con)
I congratulate my right hon. Friend on the comprehensive package of support that he has provided, which is fiscally responsible in the face of global energy-price volatility. My constituents will have the benefit and reassurance of the rebate on energy bills that the Chancellor has announced, but they will not have the reassurance of the council tax support he is making available in England. Will he at least encourage the Welsh Government to follow suit, so that my constituents have the same benefit as those in England, or even go a step further and insist that the benefit is passed on?
Rishi Sunak
I can confirm that the Welsh Administration will receive £175 million or so in Barnett consequentials, which will enable them to provide a similar discount. The Chief Secretary to the Treasury will speak to the Welsh Government later and will very much make the point that we would like to see that happen, to the benefit of all my right hon. Friend’s constituents and people throughout Wales.
Mr Clive Betts (Sheffield South East) (Lab)
On the council tax rebate, some of the poorest families do not pay significant amounts of council tax because they are on council tax support schemes. Even if their council tax bills are less than £150 a year, will they still get the full £150? Will their local authority pay that to them in cash in April? On the £150 million discretionary fund, will it truly be at the discretion of councils to decide how they spend it, or will the Government direct how it is spent?
Rishi Sunak
The hon. Gentleman is, of course, well informed on these issues. Our intention is that those people will benefit from the £150, which is why we are providing the discretionary fund. It has been sized with a sense of who those people are and how many they are. We will of course provide some guidance to local authorities on whom we would expect the support to go to, but ultimately they will be able to make those decisions for themselves.
John Penrose (Weston-super-Mare) (Con)
I thank the Chancellor for an extremely welcome package, which is the latest step in a series of strong reactions to different crises throughout the pandemic and today. He also mentioned improving investment in North sea gas fields, which is very welcome. It is only a temporary set of solutions, however, that will dull the initial economic pain without solving the long-term problem of sky-high energy prices. What conversations has he had with the Energy Secretary, who is sitting next to him, about solutions to deal with those longer-term problems? When we can we expect to hear answers on such things as reforming the price cap and the wholesale energy market?
Rishi Sunak
My hon. Friend is very thoughtful on such matters and has, rightly, long made the point that we must also ensure that the long-term energy market is working in all our benefit. The Energy Secretary, the Prime Minister and I have been involved in such conversations for some time. The Energy Secretary is working on a set of measures that will address many of my hon. Friend’s concerns and he should expect to hear from the Government soon.
Alex Davies-Jones (Pontypridd) (Lab)
May I say how nice it is to finally see the Chancellor in his place? Some of us had been considering filing a missing persons report given his absence in recent weeks. Although I appreciate his update, for families across Pontypridd and Taff Ely, it is another case of too little, too late. The Welsh Labour Government have doubled the warm home discount scheme and Labour’s proposal would have taken £600 off the bills for the poorest in our country, but his plan gives them £350 off. Why does it fall so far short of what is needed and what is proposed?
Rishi Sunak
I am sorry that the hon. Lady did not welcome the £175 million in Barnett consequentials for the Welsh Administration. The Government are providing significant support for those on middle incomes, because they are also struggling, and we believe that is the right approach.
Bob Seely (Isle of Wight) (Con)
I welcome the Chancellor’s recognition, as my hon. Friend the Member for Weston-super-Mare (John Penrose) said, of the importance of a long-term energy policy. I thank him very much for the help for council tax payers. Bands A to D cover most folks on the Island. Can he confirm that he is talking about people with primary residences on the Island and nationally?
Rishi Sunak
My hon. Friend makes an excellent point. I confirm that the £150 is not for those with second homes or empty homes. We will make that crystal clear in how the policy is executed.
Jim Shannon (Strangford) (DUP)
I thank the Chancellor for his contribution. I do not want to be churlish—a fair bit of money has been set aside and we appreciate that—but with the further rise in energy prices and the uplifted cost of living in general, working families will have to choose what to cut out of their lives to make ends meet. I put on record that I welcome the £150 million for Northern Ireland and the other Barnett consequentials, but will he consider and commit to reviewing the child benefit threshold for families whose wages are the same but are simply not worth the same in real money terms as when the threshold was introduced in 2013?
Rishi Sunak
I am glad that the hon. Gentleman recognises that there are two sets of Barnett consequentials for Northern Ireland stemming from each of the policies, which sum total £250 million. He will appreciate that I cannot comment on future tax and welfare policy but, as always, I will take what his says and reflect on it.
Jonathan Gullis (Stoke-on-Trent North) (Con)
I warmly welcome the Chancellor’s statement because 94% of properties in Stoke-on-Trent are in council tax bands A to C, so the £150 rebate will do wonders across Stoke-on-Trent North, Kidsgrove and Talke. From his recent visit to the city, he knows that the ceramics sector is an energy-intensive industry and will be looking for more creative solutions in the short term to help with rising energy costs. Can he confirm that he will meet me and other Stoke-on-Trent MPs to discuss those ideas further?
Rishi Sunak
I am always happy to meet my hon. Friends from Stoke, which benefited from not just one, not just two, but three successful levelling-up fund bids, and which I was pleased to visit recently. My hon. Friend is right and he is, rightly, a proper champion for the ceramics sector in this House. I enjoyed meeting representatives from that sector on my recent visit and I would be happy to meet him and them to discuss the situation further.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
We all know that the Chancellor is a fast-talking, slick operator who knows how to keep his head down when it is useful, but as someone who has been in the House since 1979, he is the most incompetent Chancellor that I have ever seen. When children go to bed—[Interruption.] He does not like it, but when children in my constituency go to bed with no food in their tummies and no heat in their homes, what does he think is the honourable position of a Chancellor who has just allowed £4.3 billion to be taken in fraud from one of his direct policies under his watch? Any other Chancellor that I have known would have come to the House today to resign.
Rishi Sunak
I will let this Government’s record on economic policy speak for itself. It is a record of which I am proud. I can provide the hon. Gentleman with the reassurance that I and the Government remain committed to tackling fraud wherever we see it. He mentioned the figure of £4.9 billion. As I said to the House in oral questions on Tuesday, that estimate has already been reduced by a third—by £1.6 billion—because of the actions that we are taking. I will not go into them all now, but he should know that we will go after everyone wherever we can to recover that money for the taxpayer, and I am confident that we will do a very good job.
Jacob Young (Redcar) (Con)
This is a targeted package that helps those just about managing, which is entirely right. The last Labour Government closed six nuclear power stations and had a policy of no new nuclear. Does my right hon. Friend agree that, alongside these measures to help people in the short term, it is imperative that we invest in our long-term energy security—in domestic gas production, in renewables, and, crucially, in new nuclear?
Rishi Sunak
My hon. Friend is absolutely right about some of the failures of policy that the Labour party propagated in power. That is being fixed by my right hon. Friend the Secretary of State of Business, Energy and Industrial Strategy. We are investing not just in new nuclear, as he said, with billions of pounds at the spending review, but in offshore wind, and—as he knows in his part of the world—carbon capture and storage and hydrogen, where Teesside is playing a starring role in that green energy revolution.
Ben Lake (Ceredigion) (PC)
The Chancellor will be aware that nearly 20% of households in Wales are not connected to the mains gas grid. In rural areas such as Ceredigion, that figure actually rises to more than 80%. Research by the Office for National Statistics notes that Ceredigion suffered the highest increase in fuel bills over any area in mainland UK in the past year, increasing by £863 on average. Will the Chancellor confirm whether the rebate announced today will also apply to households that are not connected to the main power grids?
Rishi Sunak
The hon. Gentleman makes an excellent point and one that colleagues not just in Wales, but in England and Scotland will also be asking, not least my own constituents. I can tell him that the rebate will be delivered through electricity bills to solve the exact problem that he mentions, which is much more universal. Separately, obviously, the council tax discount in England is through the council tax system, so it is agnostic to the heating source, and I would expect the Welsh Government, should they choose to do the same thing, to be able to solve that problem in that way.
Jane Hunt (Loughborough) (Con)
Quite simply, this is a superb plan—very well done. My right hon. Friend is right to question the Opposition’s idea of a windfall tax, given that Gordon Brown completely stifled the telecoms market in the late ‘90s by doing exactly the same. Speaking as the chair of the all-party group for district councils, I wonder whether my right hon. Friend will join me in thanking councils for once again being able to offer swift and agile responses to local communities and families in helping us to deliver this today.
Rishi Sunak
As a former local government Minister, it gives me great pleasure to pay tribute to district councils and to the work of the District Councils’ Network. I do not know whether John Fuller is still running it, but it does an excellent job. Once again, when we need it to help us to deliver policies, it steps up. I can confirm also that it will have received new burdens funding for doing that, but I thank it for all its work, and my hon. Friend is right to champion it.
Dame Diana Johnson (Kingston upon Hull North) (Lab)
Even before covid, a third of children in Hull North, many in working families, were living in poverty. With the cost of living crisis and energy prices soaring, will the measures that the Chancellor is introducing today see an increase, or a decrease, in the number of children living in poverty by Christmas?
Rishi Sunak
Thanks to the actions of this and previous Governments, since 2010, there are 200,000 fewer children living in poverty. We also know that children growing up in workless households are five times more likely to be in poverty than those who have working parents, which is why it is very good news that the number of children in workless households has fallen by 700,000 over the past decade. That is the best way to get children out of poverty: find jobs for their parents, and that is what this Government are committed to doing.
Dr Caroline Johnson (Sleaford and North Hykeham) (Con)
I thank my right hon. Friend the Chancellor for his honesty in stating that we cannot completely remove inflationary global pressures, and for his focus on supporting hard-working middle-income and low-income families. I want to ask about the discretionary £150 million fund. In particular, will he ensure that that funding is directed so that all those living in military family accommodation who are not eligible to pay council tax are eligible for the £150 discount?
Rishi Sunak
My hon. Friend is right to highlight one of the categories of those who are exempt that we want to get support to and ensure that they are included in the discretionary fund. I know from our conversations that she has also highlighted those living in rural constituencies such as hers who are off the gas grid, and I hope she is reassured by the answer I gave to the hon. Member for Ceredigion (Ben Lake).
Karin Smyth (Bristol South) (Lab)
The Chancellor’s proposal to “buy now, pay back later” while ignoring the eye-watering profits from oil and gas companies, as he did with the fraudsters, tells us all we need to know about whose side he is on. Prepayment meter customers face a much higher rate—£708 on average—so can he tell us how these plans will help the people who pop down to the corner shop to top up their prepayment cards?
Rishi Sunak
Around 4 million households have prepayment meters, and about 40% of those will be able to receive the rebate on bills automatically because of the nature of their prepayment meter. For the remaining 60%, we will have to do something more manual and there are various ways we can do that, whether by sending barcodes or QR codes through the post or by email—[Interruption.] Before the Opposition say anything, that is exactly how we already deliver the warm home discount to those people, and we did exactly the same thing in a similar measure in 2012 under the coalition. This affects less than 9% of all households, but we have a plan for them. We will work with the energy companies to ensure that all those on prepayment meters benefit in exactly the same way.
Mr Philip Hollobone (Kettering) (Con)
Residents in the Kettering constituency will warmly welcome the assistance that the Chancellor has announced to help them with their rising energy bills. As well as the measures he has announced today, there is an additional £1.8 billion of support out there in unclaimed pension credit. One million pensioners are eligible and not claiming, including 4,500 in north Northamptonshire. Just as we reached out to pensioners to come forward to get their vaccination, please can we reach out to those people who are not claiming, because some of them have the highest energy bills?
Rishi Sunak
My hon. Friend makes an excellent point, which he also made the other day in Treasury questions, when we committed to looking at how best we could take up his suggestions. I think I am right in saying—the Secretary of State for Business, Energy and Industrial Strategy, my right hon. Friend the Member for Spelthorne (Kwasi Kwarteng) will correct me if I am wrong—that the warm home discount is already moving to a more automatic system for that rebate for those on pension credit, but we will of course take his suggestions on board and figure out how best to improve what we do.
Geraint Davies (Swansea West) (Lab/Co-op)
Each week, the Prime Minister tells us that there are 420,000 more people in work than there were before the pandemic, yet the Office for National Statistics tells us that there are 506,000 fewer people in work than before the pandemic. The reason for that, as the Chancellor knows, is that the Prime Minister excludes the self-employed. Will the Chancellor correct the record to show that there are in fact half a million fewer people in work, and explain why, in the circumstances, he is imposing a massive national insurance tax on jobs?
Rishi Sunak
If the hon. Gentleman looks at the remarks I made earlier, he will see that I was clear that there are 400,000 more people on payroll, and that is the right use of that statistic. It is obviously harder to track those in self-employment because we have real-time information numbers from HMRC for those on payroll. We are proud of our track record on jobs. Unemployment in this country was forecast to reach 12%, with millions of people unemployed, but unemployment has now fallen for almost 10 straight months. It is almost back to the record lows we saw pre-pandemic, and we have record job vacancies and record low redundancies. That is all evidence that our plan for jobs is working.
Mr Steve Baker (Wycombe) (Con)
As somebody who supported a VAT cut, may I invite my right hon. Friend to confirm that people in Wycombe will receive more help faster under his plan?
Rishi Sunak
I can give my hon. Friend the reassurance that the vast majority of people in his constituency will receive £350. Those in council tax bands A to D will get £150 in April. That is more than a VAT cut would have given them, and it will come faster. I am grateful to have his continued support.
Rachael Maskell (York Central) (Lab/Co-op)
Older people, sick people at home and many disabled people will need to put on their heating for longer, and therefore will be paying more. What additional steps will the Chancellor take to ensure that they are not pushed further into poverty, and not least as he has tangled with the pensions triple lock this year, what has he got against older people?
Rishi Sunak
This Government and previous Conservative Governments have a proud track record of supporting those who are retired and are pensioners. Because of the triple lock, which has been in place because of a Conservative Government, pensions are now at their highest level relative to earnings in 30-odd years, and we are protecting pensioners with a double lock this forthcoming year. Of course, the winter fuel payment, with up to £300 of support for those over the state pension age, will address exactly the hon. Member’s concerns.
Mr Deputy Speaker (Mr Nigel Evans)
I call Matt Vickers—[Interruption.] Sorry, Martin Vickers.
Martin Vickers (Cleethorpes) (Con)
Thank you, Mr Deputy Speaker. It must have been the mask.
As the Chancellor did at the time of the pandemic, he has put together a very comprehensive protective shield around people in my constituency, and that is very welcome. Many well-paid jobs are being created, particularly in the energy sector, thanks to Government policies, but there are many, particularly in food processing or the security sector, who are on very modest incomes and fixed incomes. Can my right hon. Friend give them an assurance that he will keep this policy under review so that if the energy price rise continues, as is likely, they can be reassured that support will be available?
Rishi Sunak
My hon. Friend is always a champion for those who are working hard and doing the right thing, and that is why he has rightly championed the freeport in his constituency to provide jobs and opportunity for those families. I can give him that reassurance. It is because it is likely that energy prices will remain high and may even increase when the October price cap is set that the rebate of £200 will come in in October—in that month. I hope that will help at that time if energy bills continue to rise then, and of course the £150 will come much sooner, which gives him the reassurance he needs. As I said earlier, we do have to be honest and recognise that we are all going to have to adjust to higher energy prices, but what we can do is slow the pace and scale of that adjustment for families across the country.
Mike Amesbury (Weaver Vale) (Lab)
Is the Chancellor comfortable about the fact that he has given more support to fraudsters, writing off billions of pounds of debts, than he is giving to hard-pressed families for whom this just prolongs the pain? This 54% price rise will be paid over four years, won’t it, Chancellor?
Rishi Sunak
As I outlined earlier this week, nothing has been written off. We are committed to going after everybody who has defrauded the taxpayer. It is important to remember the context. These schemes were delivered at enormous scale: 9 million people benefited from the furlough scheme and 1.5 million small businesses benefited from bounce back loans. At the time—we can remember the context—I was here almost every other day being rightly held to account by Members on both sides about the speed of support that we were getting to businesses in all of our constituencies that needed cash as quickly as possible. In those circumstances, I had to make balanced trade-offs and judgments about the best way to support those people. I am confident in the judgments we made, but it is also right, now that we are through the pandemic, that we go after anyone who has defrauded the Government and the taxpayer with the full force of the law.
Sally-Ann Hart (Hastings and Rye) (Con)
I join my colleagues on these Government Benches, and I am sure many secretly on the Opposition Benches, in thanking my right hon. Friend for his measures today. As he is aware, we have some real deprivation in my beautiful constituency of Hastings and Rye. Can he confirm that the measures announced by him today target support to the most vulnerable and disadvantaged in my constituency, are more generous as well as more financially sensible than Labour’s uncosted plans, and will reach the families who most need help now?
Rishi Sunak
My hon. Friend is absolutely right. Getting cash to people who need it quickly is paramount in this circumstance. That is why the £150 will go to those in her constituency in council tax bands A to D in April, which will provide immediate relief. As she said, this is a financially responsible approach to this problem, because we do have to continue getting our borrowing and debt down so that the plan we have put in place maintains us on our path. It is actually important to recognise—I have made this point before—that one of the reasons why I care about getting our borrowing and debt to better levels is so that we have the resilience to respond to shocks exactly like this, and that is why it is important that we do rebuild such resilience.
Sarah Jones (Croydon Central) (Lab)
The Chancellor’s package offers £350 off to the poorest households. Labour’s proposals offer £600 off to the poorest households. The cap has gone up by £693. Why is the Chancellor offering the poorest households so much less than they would get under Labour?
Rishi Sunak
Those of us on the Government Benches believe that it is also right that we support those on middle incomes; those families are also working hard and they deserve our support. It is important that they know that the Government are on their side at times like this, and that is why we have taken the approach that we have. But of course we are cognisant of those on lower incomes. As I said, this is a progressive package. Flat-rate payments are a greater percentage of income for people on lower incomes, and indeed with smaller energy bills. As I have outlined, we have a range of other interventions specifically targeted at those people.
Ruth Edwards (Rushcliffe) (Con)
I welcome this generous plan, especially the inclusion of families on middle incomes, which will do a lot to help many of my constituents in Rushcliffe. Does my right hon. Friend the Chancellor agree that now is the time for us to be investing in our domestic energy industry and energy security—in turbo charging our move to clean energy, as we are doing in the east midlands freeport, rather than risk driving investment from the UK with a counterproductive windfall tax as the Labour party would?
Rishi Sunak
I agree with my hon. Friend. She puts the point excellently. Government Members are in favour of more investment in domestic energy, more jobs for the British economy and greater energy security for our nation.
Ronnie Cowan (Inverclyde) (SNP)
With families facing an extra £2,800 of expenses, this package does not really touch the sides at all, does it? With regard to electricity, the Chancellor said:
“with the Government meeting the cost in full.”
But he is not is he? He is spreading it over five years, which means that next year, when electricity prices continue to rise, the poorest families will face increased bills and have to find £40 to pay back to the Chancellor. You have not put a lid on it, Chancellor, you have just kicked the can further down the road.
Rishi Sunak
As my right hon. Friend the Member for Harlow (Robert Halfon) said earlier, £350 is a significant amount of money for families up and down the country, and I think it will make a real difference and lessen their anxiety. What I was talking about was the council tax rebate, which will be fully Exchequer funded with no cash due back.
Mike Wood (Dudley South) (Con)
I thank my right hon. Friend the Chancellor for meeting me and colleagues and responding so positively on this issue. He may remember that I asked him to ensure that any support extended to cover those just above benefit thresholds because they are often most in need of help. How does the support that he has announced today for those constituents compare with the suggestions made by Labour?
Rishi Sunak
My hon. Friend, as ever, makes a thoughtful contribution, and I enjoyed our conversations. He was right to champion those who are on middle incomes. As a result of those conversations with him and others, we have designed a package that does exactly as I think he would like to have seen. By targeting support at those in council tax bands A to D, four out of five households—those up to middle income, those just about managing—will receive £150 extra support, and they will get that support in April.
Ruth Cadbury (Brentford and Isleworth) (Lab)
A poll by Survation today reveals that 63% of the public support a windfall tax on oil and gas producers’ profits. It is not like this Government to ignore the polls so may I suggest that, rather than misnaming, as he did in his statement, a renewable loan as a discount, why not go for the windfall tax and give that money to our hard-pressed constituents?
Rishi Sunak
We have had this debate. Conservatives believe in more investment in our domestic energy sector. We want to support British jobs and British energy security and we believe in doing the right, responsible thing. That is what a responsible Conservative Government do.
Saqib Bhatti (Meriden) (Con)
I thank my right hon. Friend for these packages, which will help my constituents across my constituency. On the issue of a windfall tax, will my right hon. Friend confirm that the Labour party’s call for a windfall tax would undermine competition in the market, reduce investment and kill off jobs? Ultimately it would mean that energy prices were likely to be higher for longer and hit the poorest the hardest.
Rishi Sunak
My hon. Friend is exactly right. Some 200,000 jobs are supported in that industry, and as I pointed out earlier, there are £11 billion-worth of projects waiting to get going. I would like to see those projects go ahead, which will be good for the country’s energy security, good for our economy and good for jobs. I know that the Energy Minister and I share that ambition.
Brendan Clarke-Smith (Bassetlaw) (Con)
I thank the Chancellor for his statement. My constituents in Bassetlaw will be breathing a sigh of relief at his announcements today, which blow the Opposition’s VAT cut out of the water. The Chancellor mentioned wholesale prices; as we become more self-sufficient and move to renewables and new nuclear, is he able to outline what the Government and the Treasury are doing to tackle this problem at source? May I suggest the excellent step fusion project in Bassetlaw that we are bidding for?
Rishi Sunak
I am grateful for my hon. Friend’s support, and I am glad that this announcement will provide some reassurance to his constituents, who I know would be worried about the cost of living. I have heard warm noises about his fusion project from my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy. We announced, I think, £120 million for advanced nuclear technologies in the spending review, and there is no doubt that there is a productive conversation to be had about how we allocate that money to projects such as his.
Andrew Jones (Harrogate and Knaresborough) (Con)
I thank my right hon. Friend for today’s statement, and for confirming that this significant £9 billion package is going to be targeted at those who need help most. He also highlighted that 80% of cost increases are coming from the global wholesale price increase, so is he going to continue his focus on trying to insulate the UK as much as possible from those global price fluctuations, increasing our energy security, boosting domestic production and ensuring that our energy supply is diverse in nature, sustainable for the future and significant in scale?
Rishi Sunak
My hon. Friend is absolutely right. It is important that we have diversity of supply: that is what we are doing, whether through offshore wind, nuclear, carbon capture and storage, or exploiting domestic gas. We are doing all those things to build diversity of supply for our security. My hon. Friend is right to highlight that, in the long term, that is the right policy for British customers.
Jason McCartney (Colne Valley) (Con)
I welcome these targeted and fair measures that will help those who need help most. While Labour’s VAT plans would help by just £89, I welcome the fact that this council tax rebate will help 89% of households in Yorkshire and Humber—I have just had the figures through—with a £150 rebate. Will the Chancellor also confirm that those who fall outside the A to D bandings and who still need help will be able to get that help through the extra discretionary funding for local councils?
Rishi Sunak
I am grateful to my hon. Friend, because I know that this is an issue that was on his mind, and he wanted to make sure his constituents got the support they needed at a time of anxiety for them. I can confirm that the £144 million discretionary fund is there to take care of those people—we estimate around 300,000 people—who are on means-tested benefits and happen to live in council tax bands above A to D. That is why that discretionary fund is there, to get support to the people he mentioned.
Alexander Stafford (Rother Valley) (Con)
I thank the Chancellor for the £350 help that will really benefit everyone in Rother Valley. Does he agree that it is right that this Government are helping not just those on means-tested benefits, but those not on benefits—the lower and middle-income families—because they also need a helping hand? It is great that this Government reward hard work and those who are doing the right thing.
Rishi Sunak
My hon. Friend is absolutely right. He has championed his constituents who are working hard and doing the right thing, and today’s announcement will give them reassurance that this Government and their Member of Parliament are on their side.
Mr Deputy Speaker (Mr Nigel Evans)
Finally, my former constituent, Mr Holden.
Mr Richard Holden (North West Durham) (Con)
Thank you very much, Mr Deputy Speaker; it is always a pleasure to see you in the Chair. Could my right hon. Friend confirm that all UK households will benefit from the £200 smoothing rebate, and that almost 95% of County Durham residents will benefit from the £150 council tax rebate, including those who are off-grid—a similar proportion to the constituency of the right hon. Member for Doncaster North (Edward Miliband), who I see has now scuttled away? That £150 is over 50% more than Labour’s VAT plan, which would have benefited the richest people most. Will the Chancellor continue to pursue a one-nation Conservative approach, not an inner London two-kitchen one?
Rishi Sunak
There were so many excellent points in my hon. Friend’s question. The only thing on which I will correct him is that the energy rebate is Great Britain-wide, because the Northern Ireland energy market is devolved and we do not have the legal powers or the regulator to do it there. Everything else he said is spot on, and I can confirm that this Government will continue to be on the side of his hard-working constituents, whom he does a great job of championing. Today’s announcement will give them the reassurance they need that, at a time of rising prices, this Conservative Government are stepping in to help, as we have and always will.
Mr Deputy Speaker (Mr Nigel Evans)
I thank the Chancellor for his statement and for answering questions for well over an hour.