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.
Time for a recap
Chancellor Rishi Sunak has warned that the government cannot fully insulate people from the cost of living crisis.
Questioned by the Treasury Committee over the government’s £15bn cost-of-living package, Sunak said that it wasn’t possible, or advisable, to try to fully make up for rising living costs.
Sunak also argued that the package would make a very significant difference, especially to those struggling most.
But the chancellor faced heavy criticism from opposition MPs, who said he had rushed out the package to protect Boris Johnson and distract from the Sue Gray report into Partygate (which he denied).
Ali asks whether it would have been more orderly to have this statement alongside an OBR forecast Sunak defends – March forecast closed only very soon after start of Feb observation window so big uncertainty around future price cap
Labour MP Siobhain McDonagh said it was a mistake to give second home owners two £400 reductions to their energy bills (let alone a triple payment for those who own three properties), while RushanaraAli MP said Sunak was wrong to take part in Operation Save Big Dog.
Sunak also tried to play down concerns that his package will be inflationary, saying the government’s priority was to help those who most needed help.
He didn’t agree that the pound risked turning into an emerging market currency, as one Wall Street bank fears, but did acknowledge that the UK faces a short-term inflation problem fuelled by high energy prices and a tight labour market pushing up wages.
Asked by @CommonsTreasury if he shares Bank of America’s concerns that #GBP is verging on emerging market territory, Rishi Sunak unsurprisingly says “No.” But he does flag UK-specific inflation worries about tight job market, price expectations and broad-based price rises.
Despite criticism, Sunak said he was considering whether to include electricity generators in his new windfall tax (which will fund a portion of the package).
Transport troubles have hampered the return to work for many after the jubilee weekend, with more flight cancellations and a tube strike causing widespread disruption.
EasyJet cancelled a further 37 flights on Monday, as the staffing issues that have plagued the airline over half-term continued. Thousands more passengers had their travel plans upturned, after more than 80 flight cancellations by the airline on Sunday.
The airline blamed a “challenging operating environment” for the cancellations, which left some customers stranded abroad at the end of the half-term holiday.
A strike on the London underground today has also caused disruption in the capital, with commuters struggling to get to work (although many may have followed advice to work from home).
Peter Hourston, research assistant at the InstituteforGovernment, hoped Sunak would have been quizzed about claims that technical problems prevented him from raising benefits in line with the current inflation rate.
That is the end of the session – personally I was a little disappointed as to why no MPs (not even opposition members) challenged the chancellor on why he did not / could not uprate benefits by actual inflation back in April – was all down to old IT systems?
Also not much clearer how the extra £millions the govt has pumped into the household support fund will get to those who actually need it or how it works…..
The session wrapped up with Sunak resisting being drawn on the failure of multiple retail energy firms since wholesale prices began to climb last summer.
On measures to keep bills down, he says the government has cut VAT on insulation materials, and on technologies such as heat pumps.
Sunak says he his spending around £6bn over the course of this parliament on insulation Says it is fair to ask whether govt “getting bang for its buck” when it comes to current insulation supprt
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).
Sunak being v coy about discussion with electricity generation industry as to whether the govt will extend windfall tax
Doesn’t want to “get into specifics” of tax policy under consideration with industry
Expect a statement as soon as this has been developed but “not months”
Tory MP Gareth Davies asks whether the govt has communicated to companies as to the tax relief on the windfall tax should be used for a ‘green’ or wider NZ objectives
Q: You say the levy would end early if oil and gas prices return to more normal levels – what would that be in practice?
RishiSunak 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:
Chancellor says his Energy Profits Levy, paid by oil and gas producers in North Sea, will “fall away” either in 3 years time (due to sunset clause) or when market price of oil drops to “$60 – $70” a barrel.
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.
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 RushanaraAli.
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.
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.
Angela Eagle teases the chancellor – “one of your own backbenchers called it red meat to socialists…didn’t know you were one of us chancellor…”
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 DanYork–Smith says this is to reduce the risk of fraud.
Dan York Smith said that the need for non-direct debit council tax payers to fill in forms to claim £150 rebate is to avoid risk of fraud – music to Theodore Agnew’s ears (see earlier thread)….
On the council tax rebate Sunak says he didn’t want to discount bills as he wanted people to receive a lump sum…
Is this better economics (single benefit v 12 small amounts) or good politics (so people are more aware of the support their getting from the government)
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.
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.
Q: Why was there no support for businesses in last month’s cost of living package, asks Conservative MP KevinHollinrake.
RishiSunak 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].
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.
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.
Dan York-Smith chips in to point to the household support fund which should cover difficult cases who fall outside main measures
Sunak says he intervened because of the severe impact on real incomes (which wasn’t necessarily the case in e.g. early 90s inflation)
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.
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