No more help with energy bills before autumn, Rishi Sunak signals

Chancellor says he will ‘act if necessary’, as MPs warn of ‘vicious’ rise in cost of living

There will be no further help for households struggling with energy bills before the autumn, chancellor Rishi Sunak has signalled.

Mr Sunak is coming under pressure to step up assistance as bills for gas and electricity soar by an average £700 next week, after last week’s spring statement was blasted for failing to do enough for the poorest.

But he today told MPs that it would not be “appropriate” to take further action until it was clear how far the energy price cap will rise in the autumn, and said that even then he would only act “if necessary”.

Appearing before the House of Commons Treasury Committee to answer questions on last week’s mini-budget, the chancellor was accused by Labour’s Angela Eagle of “making a political choice to plunge 1.3 million people – including half a million children – into absolute poverty” by failing to upgrade welfare benefits in line with fast-rising inflation.

But he insisted that the tax and benefit changes he has imposed as chancellor have been “progressive”, and said that any spare cash available to him in future will go on tax cuts not additional spending. His decision to pre-announce a 1p cut in income tax for 2024 had been taken in order to impose “discipline” on cabinet colleagues to rein in spending over the coming two years, he suggested.

Pressed over what he can do to help families facing a “vicious” increase in the cost of living over the summer, Mr Sunak replied: “As we said very clearly in the spring statement document, we will continue to monitor the situation and as we know more, are prepared to act if necessary.

“Clearly it's very difficult to sit here today and speculate on what happens to energy prices [and] 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 that appropriate course of action ought to be.”

Justifying his decision to delay before offering any further help on bills, he stressed the “volatility” of energy prices as a result of the invasion of Ukraine. And he denied that he was “blocking” Boris Johnson’s attempts to produce an energy security strategy designed to wean the UK off Russian oil and gas.

Reports suggest that the chancellor has refused to sign off investment in onshore wind and nuclear power on value-for-money grounds. It was today confirmed that the plan – promised “in a few days” by Mr Johnson at the start of this month – has been delayed again and will not appear before next week.

But Mr Sunak said: “I’m certainly not blocking anything. The PM is continuing to work through the details of that. Given how important it is, I think it’s important that we get it right. It’s being worked on at pace.”

Mr Sunak said that estimates from the Office for Budget Responsibility of a further 40 per cent rise in domestic energy prices at the next review of the energy price cap in the autumn were already outdated, with current figures suggesting that the actual rise could be 10 percentage points lower than that.

Last week’s decision to raise the threshold at which National Insurance becomes payable – on top of an earlier £9bn package targeted directly at energy prices – will help families facing price rises forecast to peak at almost 9 per cent this year, he insisted.

Dame Angela told him: “You've made a political choice to plunge 1.3m people – including half a million children – into absolute poverty.

“People on fixed rates of income are going to suffer very, very badly in the next period, whatever happens in October. A single person caring for their parent whose main source of income is their carers allowance of £67 a week is not going to be able to accommodate a huge trebled or quadrupled energy bill.”

Mr Sunak said he had opted to spend £6bn on increasing National Insurance thresholds to benefit 30 million workers, rather than spending the money on upgrading benefits to keep pace with inflation.

“Someone else sitting here could have said, `I’d rather spend that £6bn on the welfare system’,” he said. “That’s absolutely a choice that someone else could have made... I think the mix of policies we’ve got is the right mix.”

Mr Sunak agreed with committee chair Mel Stride that his announcement of a 1p cut in income tax for 2024 was effectively a “stake in the ground which you are going to defend at all costs” to prevent cabinet colleagues, including Mr Johnson, from splashing out more cash on public spending.

He denied that he had ever described himself as a “tax-cutting chancellor”. But he said that, having borrowed huge sums to pay for Covid support and raised taxes for health and care spending during his first two years at the Treasury, in future, “incremental marginal decisions should be about reducing the tax burden both for individuals and for businesses”.

Announcing the cut in the basic rate of income tax to 19 per cent two years in advance “means that hopefully we can have a more disciplined conversation about incremental public spending – which is already at very high levels – so that our collective priority is to deliver that income tax cut in 2024,” he told MPs. “We can do that best by maintaining discipline on public spending.”