Rishi Sunak dismissed Tory calls for immediate tax cuts today as Boris Johnson played down the cost-of-living crisis as a ‘choppy period’.
The Chancellor repeatedly blamed ‘global forces’ and made clear he is holding fire as he was grilled in the House of Commons on the Government’s response to the squeeze on incomes.
His comments came as analysts predicted the headline inflation rate will reach 9.1 per cent tomorrow – which would be the highest since 1981.
The Bank of England expects the Consumer Prices Index (CPI) to peak at 10.25 per cent during the final quarter of the year, in what would be the biggest squeeze since records began in the 1950s.
Conservative MPs today urged Mr Sunak to reduce the tax burden on families.
Senior backbencher Sir Edward Leigh warned that ‘millions of families are now desperately worried about how they’re going to pay their bills’.
Mr Sunak assured Sir Edward that cutting taxes was his ‘priority’ but added a reduction in income taxes would only come ‘as soon as the public finances allow’.
Chancellor Rishi Sunak repeatedly blamed ‘global forces’ and made clear he is holding fire as he was grilled in the House of Commons on the Government’s response to the squeeze on incomes
The Prime Minister, on a visit to the new Elizabeth Line in London, today described the cost-of-living crisis as a ‘choppy period’ and expressed optimism that Britain would ‘get through it in very good shape’
The Bank of England has already predicted that inflation will soar above 10% this year
Rishi vows to be ‘pragmatic’ on Windfall Tax question
Rishi Sunak today repeated his claim that ‘no option is off the table’ after he faced renewed calls for a windfall tax on the profits of energy companies.
A number of Tory MPs are pushing for the proceeds of a levy on oil and gas giants to be used to cut taxes or energy bills for struggling Britons during the cost-of-living crisis.
The Chancellor told the Commons: ‘We are pragmatic and what we want to see are energy companies who have made extraordinary profits at a time of acutely elevated prices investing those profits back into British jobs, growth and energy security.
‘But as I have been clear, and as I have said repeatedly, if that doesn’t happen soon and at significant scale then no option is off the table.’
Conservative former minister Robert Halfon described the bosses of energy firms as ‘the new oligarchs’.
‘The oil bosses are earning multimillion-pound salaries and getting multimillion-pound bonuses,’ he told Mr Sunak.
‘They are in essence in my view the new oligarchs and I would urge him to consider both a windfall tax on the oil companies which we can then use to cut taxes for the lower paid or cut energy bills, and also introduce a pump watch monitor to make sure that there is fair competition, that consumers get a fair deal at the pumps. ‘
The Chancellor told MPs the Government stood ‘ready’ to do more as the cost-of-living crisis continues and pointed to how ‘global forces are making life difficult for families at the moment’.
But he later said ‘no honest Chancellor’ could promise the cost-of-living crisis would not worsen.
‘There is no measure any Government can take, no law we can pass, that can make these global forces disappear overnight,’ he said.
‘No honest Chancellor could stand here and promise prices will not rise further or that the Government can cover every extra pound on people’s bills.’
He also warned that ramping up Government spending now in order to help households risked ‘making the problem worse’.
‘Prices pushed up still further, expectations of higher inflation becoming ingrained, a vicious cycle leading inexorably to even higher interests and more pain for tens of millions of mortgage holders and small businesses,’ Mr Sunak said.
‘Make no mistake, simply trying to borrow and spend our way out of this situation is the wrong approach and those paying the highest price would be the poorest in our society.’
The Chancellor added that the Government would ‘act to cut costs for those people without making the situation worse’.
Mr Sunak faced shouts of ‘when?’ from the Opposition benches.
The Prime Minister today described the cost-of-living crisis as a ‘choppy period’ and expressed optimism that Britain would ‘get through it in very good shape’.
Speaking on a visit to the new Elizabeth Line in London, Mr Johnson played up figures showing unemployment tumbling – even though wages are failing to keep up with prices.
‘It’s so unlike previous economic problems in the UK … in the 80s and 90s millions of people were on the scrapheap,’ he said.
‘You have now got unemployment at the lowest levels since 1974.
‘What we have got to do is make sure that we fix some, I think, short-term global inflation issues caused by coming out of the pandemic.
‘Particularly on supply chains, particularly on the cost of energy. But we have the fixes.
‘Plus because of the strength of the UK economy coming out of Covid we are going to continue to support people through the choppy period.
‘We will get through it in very good shape.’
Mr Sunak and his Treasury ministers have suggested new measures to help ease cost-of-living pressures are being developed but will not be introduced imminently.
Chief Secretary to the Treasury Simon Clarke today said the Chancellor will bring forward a program of measures at a time when they will ‘make the right difference in a targeted way’.
After SNP MP Stephen Flynn pressed him about the UK Government’s leveling-up program, Mr Clarke told the Commons: ‘Leveling up is a social and moral mission, and I believe very strongly that it’s vital we close the gap between the most successful parts of the UK and the rest; I represent a constituency which sits at the heart of that process.
‘To his point on the cost of living, we’ve put together a £ 22 billion package of support – including a £ 9 billion commitment specifically on energy bills.
‘But we’re absolutely clear: you do not solve an inflationary crisis by throwing money at that problem, you could worsen the issue which you’re seeking to address.
‘The Chancellor will keep all of these issues under close review – I can assure you he most certainly does – and we will bring forward a program of measures at such time that they’ll make the right difference in a targeted way which does not make the very problem worse that we all need to solve. ‘
New data from the Office for National Statistics being released tomorrow is expected to show that inflation hit 9.1% in the year to April, as measured by the CPI, as energy bills soared during the month.
The Bank of England has already predicted that inflation will soar above 10% this year.
April’s inflation will be an increase from 7% in March, and if the forecasts are right it will be the highest one-year increase in consumer prices since the CPI records began in 1998.
Matthew Ryan, an analyst at financial services firm Ebury, said that the inflation data might force the hand of the Bank’s Monetary Policy Committee, which sets interest rates.
‘If confirmed, this would place huge pressure on the Bank of England to continue raising interest rates at upcoming meetings,’ he said.
‘Communications from the MPC have turned increasingly dovish and largely muddled in recent weeks, although we think that upcoming inflation prints will likely force the bank’s hand.’
On Monday, the Bank’s governor Andrew Bailey said that, ultimately, high global energy and goods prices would hit demand in the UK and therefore increase unemployment.
‘The main driver of inflation and what brings it down is the very big, real income shock which is coming from outside forces and, particularly, energy prices and global goods prices,’ Mr Bailey said.