The boss of John Lewis has urged the government to intervene with a financial package of support to protect families from the cost of living crisis on the same scale as it did to help the UK deal with the Covid pandemic.
From me Sharon Whitea former second permanent secretary at the Treasury, said the government needed to act urgently because families were struggling to pay utility and food costs as energy bills and inflation soared.
“The time has absolutely come for action whether it is an emergency budget or whether it is another vehicle,” said White, speaking on ITV’s Peston show on Wednesday night.
The chair of John Lewis Partnership, which also owns the Waitrose supermarket chain, said action needed to be taken before summer, with consumers facing another increase in energy bills of as much as £ 1,000 annually from October.
She said: “The decisive action we saw, I thought the government did incredibly well at the pace and scale during Covid, I think we need to see the same decisive action taken at speed and at pace.”
White added that the UK faced “at least as pressing a challenge with the cost of living crisis” as it did with the pandemic, making the cost to public finances an “imperative”.
“The hit is either going to happen to households, to families, to people on low incomes, or we take a decision that given the scale and everything that’s happening… actually a temporary hit on public finances is worth it.”
White said that consideration needed to be given to a “windfall tax” on energy firms – last week BP and Shell announced bumper profits thanks to soaring energy prices – to subsidize the cost of bills consumers faced.
“I think it’s the right territory, I think certainly the government and the regulator [Ofgem] need to act on that second rise, ”she said. “Now a windfall tax, it’s not perfect but actually given the severity and the urgency of the situation, I think it’s a reasonable approach.”
On Thursday, the prime minister, Boris Johnson, indicated that there could be a U-turn on government resistance to a windfall taxwhich he has previously said could determine energy firms from continuing to invest in new projects.
“The disadvantage with those sort of taxes is that they deter investment in the very things that we need to see them putting them in,” he said, speaking on LBC. “They need to be investing in new technology, in new energy supplies for the UK.”
The host, Nick Ferrari, interjected to say that the energy companies have said a windfall tax would not deter them from continuing to pursue a long-term strategy of investing to move away from fossil fuel based energy sources.
“Well then we’ll have to look at it,” said Johnson. “What I say is I want them to make those investments – they’ve got to be making those investments – in new energy supply for our country.”
White is the latest prominent retail leader to publicly call for urgent government action, after the Tesco’s chair, John Allan, said on Tuesday there was an “overwhelming case” for a windfall tax on energy companies to help those struggling the most with the cost of living crisis. Allan said the UK was facing “real food poverty for the first time in a generation.”
Analysis by the Labor party estimated that a windfall tax on North Sea oil and gas operators could raise more than £ 2bn to cushion the pain of rising energy bills.
Profits on North Sea oil and gas firms are taxed at 30% corporation tax plus a 10% surcharge. Labor has proposed hiking the combined rate from 40% to 50%.
In March, the OBR increased its forecasts for UK oil and gas tax receipts by £ 5.2bn to £ 13bn in the year to April 2023, up from £ 3.1bn in the previous financial year. That is far higher than before the pandemic and is the highest return from the North Sea since 2010-11, when £ 9.6bn was collected.
On top of soaring energy bills, inflation is forecast to hit a 40- year high of 10% by the end of the year while the Office for Budget Responsibility, the government’s independent economic forecaster, has said that living standards are falling at their fastest annual rate since the 1950s.