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Rishi Sunak Defends Not Increasing Energy Support So He Can Prioritise Cutting Taxes

Rishi Sunak Defends Not Increasing Energy Support So He Can Prioritise Cutting Taxes

(Alamy)

4 min read

Rishi Sunak has suggested to MPs that no further assistance on soaring energy bills would be coming until at least the autumn, as he defended his resistance to higher public spending.

Sunak was quizzed by the the treasury select committee on whether his Spring Statement last Wednesday did enough to hit the most vulnerable hit by the cost of living MPs.

The Chancellor told MPs the situation regarding energy bills was “incredibly volatile” but defended not offering further support, such as an uplift to Universal Credit, to help financially vulnerable households who fear they may not be able to pay higher bills. 

He continued: “It is very difficult to sit here today and speculate on what happens to energy prices, therefore the biggest impact on living standards in the autumn. 

“Let's wait until we get there and then can decide on the most appropriate course of action. But I don't think anyone today knows what the appropriate course of action ought to be.”

The Chancellor admitted that the current tax burden on the public was “already relatively high”, and said he had “one eye on the future” to ensure the treasury has “the fiscal space we need to deal with things as they arise”. 

Sunak said that he had chosen to announce a cut to income tax in 2024 to give the public a “sense of direction” and create “discipline” against higher public expenditure. 

“My priority at this point forward is to keep cutting taxes, not to increase public spending. 

“Public spending is already forecast to increase at very significant levels over this parliament. And what we're talking about is just sticking with those very expansive spending plans.”

Sunak defended his decision not to offer more support to those on Universal Credit (UC) by uprating benefits to match current inflation levels, rather than those from September.

He said such a move would cost the treasury £25 billion, and that the most vulnerable in society had been supported by other measures such as money for local authorities, the increase to local housing allowance, and the fuel duty cut. 

Sunak added that the government’s package to help with rising energy bills is “disproportionately beneficial to those on the lowest incomes or not in work”.

The chancellor announced four major policies in his Spring Statement last week aimed at tackling the rising cost of living.

This included a cut of 5p a litre in fuel duty, and scrapping VAT on green energy measures.

Sunak also announced that from July, the threshold for paying National Insurance contributions will increase by £3,000 to £12,570.

He also vowed to cut the basic rate of income tax by 1p to the pound in 2024.

The committee’s chair Mel Stride told PoliticsHome he was keen to understand whether these measures struck the right balance between fiscal responsibility and protecting the most vulnerable.

He said he wanted to explore whether Sunak could have used the extra fiscal headroom from recent changes made to inheritance tax, capital gains and VAT to better help those on lower incomes.

Stride said: “Did he get the right call when it came to using that increased fiscal hand now to make life more comfortable for lower income households, as opposed to hanging on to it as a hedge against the problems that the economy may face in the future?”

He also reflected that the reason Sunak hadn’t gone further on energy bills is because the full impact of the Ukraine crisis had not been taken into account by the Office for Budget Responsibility’s (OBR) projections. 

“It does seem to me that we're in a very uncertain world,” Stride said last week. 

“I mean, poor old Rishi has been in this now for two years, first the pandemic, now the Ukraine situation.”

There are predictions that the energy price cap could be raised to as much as £3,000 in October, sending soaring energy bills even higher.

MPs told PoliticsHome they were cautiously optimistic following Sunak's Spring Statement last Wednesday.

But they urged the Chancellor to “keep his eye on the prize” as inflation spirals.

Many fiscal think tanks, however, were critical of Wednesday's Statement, with the Institute for Fiscal Studies (IFS) who called Sunak a “fiscal illusionist”.

Their director Paul Johnson said “in the long run this year’s giveaway turns into a substantial takeaway” after the OBR forecast that living standards would see “their largest financial year fall on record”.

The Resolution Foundation was also heavily critical, releasing analysis on Thursday that showed 1.3 million Brits are set to fall into poverty next year, as the average household faces a £1,000 hit to their finances.

Their research director James Smith said this is “set to be the worst parliament on record” in terms of living standards.

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