Sunak dismisses calls to take more action on cost-of-living crisis now
Under-fire Rishi Sunak dismisses calls for immediate action on cost-of-living crisis saying energy bills might NOT soar again – as he vows to prioritise tax cuts over extra spending
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Rishi Sunak dismissed calls for more help to alleviate the cost of living crisis today, saying his priority now was cutting taxes over spending more.
Facing MPs in a heated committee hearing this afternoon, the Chancellor was questioned on whether there was more scope to intervene to help those hit by a perfect storm of inflation, gas price rises and a national insurance hike.
He told the Treasury Committee that energy prices are too ‘volatile’ amid the standoff with Russia to know what the situation will be when the cap changes again in October.
In recent weeks estimates for the level this Autumn had varied from £3,500 to just £2,000, he said.
Mr Sunak denied that he had styled himself as a tax-cutting Chancellor in the mini-Budget last week, when he said he would take a penny off income tax before the next election.
But he argued that the burden was only going up to record levels because of huge economic shocks and significant investment in public services.
He told them that he would rather extra money received by the exchequer now was geared towards tax cuts, rather than extra public spending.
He told MPs that ‘an excessive amount of borrowing now is not the responsible thing to do’, adding: ‘There are choices. What I’m trying to balance between is what is a responsible amount of borrowing … and within that constraint how best to target the support,’ he said.
‘One may say if they don’t like my choices they would be happy to borrow a lot more, that’s just not something I think is responsible or sensible.
‘I think it has the risk of stoking inflationary pressure and I don’t think it’s the right long-term thing to do for the country. I think we need to be responsible with borrowing, I think we need to be getting debt down and borrowing under control.
‘Then there’s a choice about where to target that support. I appreciate that people might have wanted to do more on welfare, less to cut tax to people in work.’
Rishi Sunak warned that energy prices are too ‘volatile’ amid the standoff with Russia to know what the situation will be when the cap changes again in October
The OBR highlighted that Britons are facing the biggest fall in real disposable income on record this year
Mr Sunak was being grilled by the Commons Treasury Select Committee, chaired by Tory MP Mel Stride (pictured)
Committee chairman Mel Stride grilled him over why he had done ‘very little’ for those who were out of work and relying on benefits.
But Mr Sunak sounded defiance, saying: ‘If someone’s view is Government can or should make everybody whole for inflation – particularly inflation at these levels caused by global supply factors – then that’s something that I don’t think is doable.’
He said that raising benefits by the current rate of inflation rather than what it was last September would have added £25billion to Government borrowing in the period up to 2026-27.
He said that ‘irresponsible’ borrowing levels risked stoking inflation even further adding to the pressure on living standards.
‘We are already forecast to borrow in this coming year about 60 per cent more as a percentage of GDP than our post-war average, 20 per cent more as a percentage of GDP than we were forecast to borrow in October, so it is already a significant amount of borrowing,’ he said.
He appeared to hint that fuel duty might not rise next year when the 5p reduction is due to expire and the rate increased by RPI inflation, speculating about the impact on the government finances if it was ‘not possible’.
However, Mr Sunak also gave a stark warning about the vulnerability of efforts to get the government’s books back under control.
He insisted the £30billion ‘headroom’ he had left in the Spring Statement to hit his fiscal rules ‘could easily be wiped out’ by marginal moves in interest rates.
Mr Sunak has been scrambling to defuse a furious backlash for failing to do enough to tackle the cost-of-living crisis.
He was accused of being an ‘illusionist’ last week as he hailed his ‘tax-cutting’ Spring Statement, despite the burden being on course to reach the highest level since the 1940s.
The government’s own watchdog has predicted that this year will see the biggest fall in disposable incomes since records began in the 1950s.
There are claims Mr Sunak is already having to draw up a new support package, as he struggles to keep a lid on the UK’s £2.3trillion debt mountain and rising interest payments.
An Opinium poll yesterday found Mr Sunak, once one of the most popular members of the government, has seen his ratings tumble into negative territory for the first time.
Research carried out after the mini-Budget showed 35 per cent disapprove of his performances, compared to 31 per cent who approved.
The net figure of minus four was a drop of 15 points from a fortnight ago, and compares to Mr Sunak’s previous low of plus seven in October last year.
Mr Sunak said it was a ‘fair summary’ when Mr Stride suggested he had announced a 1p cut to the basic rate of income tax for 2024 now so that it would be easier to stick to amid pressure for higher spending.
‘You are right that my priority at this point forward is to keep cutting taxes, not to increase public spending,’ he said.
Mr Sunak stressed that public spending is already going up by 3.7 per cent in real terms over the rest of the Parliament.
The Chancellor said his focus from now on was on cutting taxes – although he acknowledged that the burden was going to be higher in the short-term.
However, he also stressed how uncertain the outlook is for the government finances, pointing out that a 1 per cent rise in interest rates could completely wipe it out.
Tories have managed to prevent the government going ahead with planned fuel duty hikes for many years.
IFS director Paul Johnson said last week that the chances of duty going up next year were lower than him winning the National Lottery – adding that he does not play the lottery.
And Mr Sunak told the committee that was one of his concerns in balancing the books. ‘On fuel duty, the current forecast assumed that fuel duty continued to be uprated by inflation every year,’ he said.
‘If that was not possible that is probably we think about a billion pounds plus in the target year…
‘Again if it was not possible to increase fuel duty, or the temporary reduction to not end and become permanent that would be another two and a half billion pounds.
‘Those are absolutely areas that would put downward pressure on the headroom.’
Mr Sunak is facing criticism for failing to do enough to tackle the cost-of-living crisis, with the state pension set to fall in real terms after the triple lock was suspended
An Opinium poll found Rishi Sunak, once one of the most popular members of the government, has seen his ratings tumble into negative territory for the first time
