Rishi Sunak said the government could do nothing to stem rising inflation affecting Britain’s families as he opposed calls from conservatives – including former Chancellor Kenneth Clark – for emergency relief for those struggling with the rise. of prices.
Instead, Mr Sunak used a speech to the Confederation of British Industry (CBI) to promise tax breaks for businesses during the autumn budget, aimed at boosting low productivity.
As inflation exceeds 9 percent for the first time in 40 years and experts warn that the real rise in the cost of living is closer to 11 percent for the poorest families, the chancellor said he was powerless to stop global pressure like a pandemic, war in Ukraine and disruption of the supply chain.
“There is no measure that any government can take, no law we can pass that will make these global powers disappear overnight. The next few months will be difficult, “he said.
Bank of England Governor Andrew Bailey, meanwhile, said he felt “helpless” to stem inflation.
Former Tory Chancellor Kenneth Clark has intervened dramatically, calling for an increase in the welfare of the worst and rejecting Mr Sunak’s fuel tax cut of 5 pence and proposing a 1 pence cut in income tax as a “complete loss of time “.
“I would do it in the spring statement, take out a universal loan,” he told LBC radio. “The people you have to protect from any drop in living standards, if you can, are, of course, the poorest of the poor and the lowest paid.”
Tory spokesman Robert Halfon, chairman of the municipality’s education committee, said it was “pointless” to impose an unforeseen tax on energy companies to help the poorest households pay their bills.
While he said he acknowledged the government’s fears that a tax on North Sea companies could stifle investment, he added that “desperate times call for desperate measures and we must do this and we must do it quickly”.
Finance Committee Chairman Mel Stride told The Independent that it was “fixed” time for the Chancellor to introduce an unforeseen tax and “savings to government channels in transfer payments targeted at the most affected” by rising prices.
And senior Conservative Sir Bernard Jenkin has called for a £ 13.5 billion “summer package” to support the most vulnerable, including a refund of the £ 20 increase in universal credit abolished by Mr Sunak in October and the abolition of VAT on local fuel.
Without immediate action, he warned lawmakers, “we are probably creating a worse recession than expected.”
Paul Dales, the UK’s chief economist at Capital Economics, added even more pressure when he told The Independent that the Treasury should reconsider the impact of its cost of living policies.
“They need to come up with more measures to support those who need it most than the actions that will make their main supporters happier. Prices are rising faster than incomes. “Consumer confidence is already at the second lowest level in history, before we even see a peak in inflation,” he said. “You need higher interest rates to reduce inflation.”
Mr Dales added that the Bank of England’s base rate should rise to three per cent in the coming months.
Several leading economic think tanks, including the Institute for Fiscal Research (IFS) and the Resolution Foundation, have warned that inflation is now hitting the country’s poorest families disproportionately.
IFS found that the bottom 10% of households in the UK by income face inflation of 10.9% in the 12 months to April. This is 3 percentage points higher than the inflation rate of the richest 10 percent.
“Much of this difference comes from the fact that the poorest households spend 11% of their total household budget on gas and electricity, compared to 4% for the richest households,” says IFS.
“The consequences of this economic crisis on living standards are enormous, but the government has the power to support the worst affected by proposing increased benefits – something that is needed to prevent this parliament from being the worst in history. in terms of living standards, “said Jack Leslie, a senior economist at the Resolution Foundation.
Jake Berry, chairman of the Northern Tories’ Research Group, backed the return on the increase and “something radical about VAT”. “Now or never; now is the time for the government to act. Urgency is needed, people are impatient with the November budget to pay their bills,” he said.
But Boris Johnson has ordered lawmakers to reject Labor’s demands for an urgent budget to tackle the cost of living crisis, as well as Liberal Democrats’ proposals to cut VAT from 20 per cent to 17.5 per cent to save the average family £ 600. .
Labor leader Sir Keir Starmer mocked the prime minister in the municipalities, saying he “could not decide” on an unforeseen tax to help ease the cost of energy bills, although it was “inevitable”, he said. will eventually give up pressure.
Sir Kerr said that every day the government withholds the contingency tax on energy companies, it costs consumers £ 53 million in extra energy costs, at a time when BP and Shell alone have made a profit of £ 12.37 billion in the first three months. in 2022
Although Mr Sunak said an unexpected tax remains “on the table”, Finance Ministry sources said there was no decision on a bailout package until the next energy price cap review in August, when regulator Ofgem is expected. to announce a raise to £ 1,000 for the autumn.
Mr Sunak promised at the CBI’s annual dinner in London that “where we can do it, we will do it” on the cost of living crisis, including squandering money in the budget for tax breaks and allowances designed to reward businesses that invests in capital, innovation and training.
“We need you to invest more, train more and innovate more,” he told his business audience. “During the autumn budget, we will reduce your taxes to encourage you to do all these things.
James Smith, research director at the Resolution Foundation’s think tank, raised questions about the balance of priorities in Mr Sunak’s speech.
“The chancellor is right to focus on restarting growth tomorrow and that more private sector investment is crucial,” Smith told The Independent. “But he also needs to make sure he provides targeted support to low- and middle-income families today who are hardest hit by rising inflation.
Shadow Business Secretary Jonathan Reynolds also criticized the government’s strategy. “The government’s inability to deal with the cost of living crisis and raising taxes at the worst possible moment has led to a drop in business investment in the first quarter of this year,” he said. “They need to propose an emergency budget now with appropriate business support, including a reduction in business tariffs for small businesses and support for energy-intensive industries.
Liberal Democrat Finance Ministry spokeswoman Christine Giardine said: “Rishi Sunak promises to cut taxes on business while raising taxes on families. This shows that he is completely out of touch with those who are struggling with rising fuel bills and prices.
“Every day that passes without additional support, more and more people are mired in debt and poverty. If the chancellor was serious about helping people cope, he would announce an urgent tax cut now.
COST OF LIFE: HOW TO GET HELP
The cost of living crisis has hit every corner of the UK, pushing families to the brink of rising food and fuel prices. The Independent asked experts to explain small ways you can stretch your money, including debt management and getting items for free.
– If you need to access a food bank, find the local council’s website and then use the local government website to find your nearest center.
– The Trussell Trust, which manages many food banks, has a similar tool.
– Citizens Advice provides free help to people in need. The organization can help you find grants or benefits or advise on rent, debt and budget.
– If you are experiencing feelings of distress and isolation or struggling to cope, the Samaritans offer support; you can talk to someone for free on the phone, confidentially, at 116 123 (UK and ROI), send an email to jo@samaritans.org or visit the Samaritans website to find details of your nearest branch.
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