Sunak: Can’t fully insulate people from rising cost of living
Q: If energy bills rise by even more than expected in autumn, will you provide more support?
Sunak doesn’t rule it out, saying the government is always responsive to the situation on the ground.
But he points out that the energy price cap is an average, so it doesn’t make much difference if it’s a bit higher or lower than expected.
[Ofgem predict the energy price cap will surge from £1,971 to £2,800 a year in October].
Sunak also repeats his earlier point, that it’s not possible to fully insulate people from the cost of living and inflation.
He adds that if the energy price cap is lower than expected, the government won’t claw any of its support back.
Rishi Sunak batted away questions from the Treasury Committee about whether he will include electricity generators in his windfall tax, as it’s a live tax issue.
But he says the Treasury is “working urgently” to assess the size of the extraordinary, or excess, profits which generators are making.
Q: A figure of £10bn excess profits has been banded around – but SSE told me they don’t recognise it, says SNP MP Alison Thewliss…
Sunak says he doesn’t recognise it either — and won’t say what he thinks the figure is (despite saying that there are ‘extraordinary’ profits).
He won’t say when a decision will be made, but it won’t be months away (ie, it will be sooner).
Q: You say the levy would end early if oil and gas prices return to more normal levels – what would that be in practice?
Rishi Sunak replies that Brent crude has averaged around $60 or $70 per barrel over the last few years — and that’s a level that oil companies also see as more normal.
There’s also a sunset clause which means the levy expires in three years.
Brent crude is currently trading just below $120 per barrel, and hasn’t been below $70 this year:
Q: Why did you change your mind over a windfall tax?
Sunak says he took a pragmatic approach– oil and gas producers are benefitting from high oil prices, partly driven to the Ukraine war, so it was right to introduce a levy on profits, but in a way that encourages investment.
Rushanara Ali: Sunak shouldn’t have been dragged into Operation Save Big Dog
Q: Wouldn’t have been better to draw up the cost of living package in time for the spring statement – when the Office for Budget Responsibility could have assessed it – rather than two months later to distract from lawbreaking from the prime minister, asks Labour MP Rushanara Ali.
Sunak denies any political pressure was placed on Ofgem, saying the Treasury was in regular contact with the energy regulator, and that he acted once there was clarity about how energy bills would rise in the autumn.
Ali points out that this clarity suddenly came in a week when the PM was in trouble, and a day after the Sue Gray report was released.
Sunak argues that the OBR’s process of assessing government policy doesn’t lent itself to rapid policymaking — ie, the Treasury would have had to propose the package weeks before the spring statement.
Ali is unconvinced, and unimpressed. She welcomes the announcement, but the issue is the way the government operates. It’s not acceptable that MPs are not being given the OBR’s independent assessment of the cost of living package.
She tells Sunak that the government is playing fast and loose with big decisions that need proper consideration and proper scrutiny, and that the £15bn cost-of-living package is a political decision, not an economic one.
It was a mistake to take part in ‘Operation Save Big Dog’, Ali tells the chancellor severely.
“I think we expect better from you, and you shouldn’t be dragged into his mess, frankly.
Sunak, who has repeated his denial that the timing was untoward, says he’s pleased Ali welcomes the package.
Onto the main issue gripping parliament — Boris Johnson’s confidence vote tonight.
Q: Former chief secretary to the Treasury Jesse Norman has called for Johnson to resign – does the chancellor agree?
Sunak (who backed Johnson this morning) does not, but says Norman did a very good job at the Treasury and he’s grateful for that.
Q: Do you agree with Norman that it’s grotesque for the PM to claim he is vindicated by the Sue Gray report? (As Norman wrote in a letter this morning).
Sunak repeats that he disagrees with Norman, and supports the prime minister.
Q: Political stability play an important role in economic stability, so do you agree with Norman that breaching the Northern Ireland protocol would be economically very damaging, politically foolhardy and almost certainly illegal?
Sunak insists that’s not the intention – the plan is to reach a sensible settlement with the UK’s partners over the problems with the Protocol.
Q: Do you agree with Boris Johnson’s anti-corruption tsar, John Penrose, that the prime minister broke the ministerial code and should resign (as Penrose did this morning).
Sunak repeats that he disagrees.
Andrew Sparrow’s Politics Liveblog has all the latest on tonight’s ballot:
Labour MP Angela Eagle reminds Rishi Sunak that some Tory MPs slated his cost of living package.
Craig Mackinlay called it “tripe”, while Richard Drax accusing Sunak of “throwing red meat to socialists” — Eagle smiles that she didn’t know Sunak was ‘one of us’.
Q: How can you claim you’re fiscally conservative when you’re funding this package primarily through borrowing?
Sunak insists that his overall economic policy is fiscally responsible, meaning the UK is on a trajectory for borrowing to fall from its peak, and for debt to fall sustainably.
So, there’s headroom to respond to economic shocks.
Sunak: Can’t fully insulate people from rising cost of living
Q: If energy bills rise by even more than expected in autumn, will you provide more support?
Sunak doesn’t rule it out, saying the government is always responsive to the situation on the ground.
But he points out that the energy price cap is an average, so it doesn’t make much difference if it’s a bit higher or lower than expected.
[Ofgem predict the energy price cap will surge from £1,971 to £2,800 a year in October].
Sunak also repeats his earlier point, that it’s not possible to fully insulate people from the cost of living and inflation.
He adds that if the energy price cap is lower than expected, the government won’t claw any of its support back.
Labour MP Emma Hardy is concerned that council tax payers who don’t pay by direct debit must fill in forms to receive the £150 rebate announced earlier this year.
The Treasury’s Dan York–Smith says this is to reduce the risk of fraud.
Sunak challenged over giving two £400 payments to second-home owners
Labour MP Siobhain McDonagh challenges Rishi Sunak over his decision to allow second-home owners to receive two £400 discounts on their energy bills.
She explaind that there are 772,000 households who own two homes – they’ll receive £620m between them.
Another 61,000 people own three homes — and will share a £73m “taxpayer-funded windfall”.
Rishi Sunak agrees that some people who don’t need the help will get the rebate – but that’s a consequence of deciding to give some support on a universal basis, given the scale of the challenge.
Q: How much will you get?
Sunak says he’s giving his rebate to charity (as he said last month).
But you’re being philanthropic with other people’s money, McDonagh replies. She quotes Margaret Thatcher’s view, that there is no such thing as public money, there is only taxpayers’ money.
Q: How can it be right that someone on the Sunday Times Rich List, or indeed any MP or minister, gets this rebate?
Sunak says that Labour’s policy of a VAT cut on energy bills would also help wealthy families, and that middle-incom families need support too.
And he denies that the package was rushed out to distract from Sue Gray’s Partygate report — although McDonagh argues that if the Treasury had drawn up its plans properly they’d avoid giving a £1,200 rebate to those who own three homes.
Sunak: Not seeing signs of business distress
Q: Why was there no support for businesses in last month’s cost of living package, asks Conservative MP Kevin Hollinrake.
Rishi Sunak says that consumer price inflation is being caused by firms lifting their prices.
He says the government is providing support for companies, such as business rate holidays, and the employment allowance tax cut [which lets companies reduce their annual National Insurance liability by up to £5,000].
He also points to the government’s Help to Grow support campaign, and the support for energy-intensive industries.
Q: The Federation of Small Business says 200,000 firms are in “serious trouble”, and that another 300,000 “have only got weeks left” – is that a concern?
Sunak says the government tracks business insolvencies and business profitability, and isn’t seeing signs of distress.
Firms have, in aggregate, around £100bn in excess deposits, he explains.
Q: But other countries are offering more support to businesses, aren’t we an outlier?
Sunak say the UK’s support packages are comparible to fellow countries, but it is more targeted at households.
Q: Are you braced for having to provide more support in the autumn?
Sunak says the new package is significant, and was rolled out once the government knew how much energy bills would probably rise in autumn.
But it’s not possible, or advisable, to try to fully make up for rising living costs, he adds.
Q: Will the cost of living pckace prevent an increase in child and pensioner poverty, asks Anthony Browne MP.
Sunak says it will make a very significant difference, and the biggest difference for the most vulnerable.
Browne is concerned that the package will create a ‘cliff edge’, where people on universal credit will lose some benefits.
Sunak replies that wherever you draw a line, someone will fall the other side of it.
Dan York-Smith, director of strategy, planning & budget at the Treasury, says the household support fund was extended (until March 2023) to help families who can’t get targeted support.
Q: Are you concerned about sterling, given Bank of America’s warning last week that the pound is showing ‘emerging market’ characteristics?
Sunak says he has confidence in the UK’s economic outlook. In the short term we are experience high inflation, as are many other countries, mainly due to external factors such as the energy price shock, and the tight labout market, he says.
But core inflation is still very elevated, and broad-based, the chancellor says.
But he insists the UK has the “tools and determination” to get inflation down — on the fiscal side, monetary policy side, and supply side.
Q: How much extra borrowing will be needed to pay for the £15bn cost of living package?
Rishi Sunak says it depends on any possible levy electricity generators, given their extraordinary profits.