LONDON (Parliament Politics Magazine) – New initiatives to alleviate the cost-of-living crisis, according to Rishi Sunak, will have a “minimal impact” on inflation.
The chancellor told the BBC that he had found the correct balance between helping people and driving up costs “excessively.”
Mr Sunak had previously unveiled a Ā£15 billion plan to lower energy rates, which was partially funded by a windfall tax on oil and gas companies.
He denied that the statement was made hastily in order to deflect attention away from a probe into rule-breaking parties in No 10.
He said he selected this week to announce the measures because the energy regulator, Ofgem, had revealed its projection of impending energy price increases.
It meant that they could scale and size their policies in an effective manner, he said.
After weeks of cabinet ministers rejecting the notion, the chancellor decided to impose a 25% fee on oil and gas companies.
The measure, which has been proposed by opposition parties, would levy a one-time charge on the firms’ record profits.
Mr Sunak referred to his proposal as a “temporary, targeted energy profits levy” rather than a windfall tax, as the Liberal Democrats and Labour have demanded.
These were windfall gains, and they would be taxed, he said, adding that the charge would contain incentives to encourage companies to invest.
He thought those were blunt instruments, he remarked, referring to similar proposals made by opposition parties.
They had devised a strategy that would continue to incentivise and stimulate investment, he told the BBC.
‘Worry’
Food and energy expenses have climbed in recent months, putting strain on households, while inflation has reached a 40-year high.
Every household will receive a Ā£400 energy bill reduction under Mr Sunak’s new initiatives.
A total of Ā£650 will be deposited into the accounts of eight million households on means-tested benefits in two lump sum payments.
The increased support will be covered by about Ā£10 billion in additional borrowing, along with the windfall tax.
More support, according to PM Boris Johnson, might lead to a “inflationary spiral,” since giving more money to people could lead to additional price increases.
Mr Sunak, on the other hand, said that he had targeted assistance to the most disadvantaged households in order to prevent fueling inflation and worsening the situation.
That was something that he did watch and he worried about, he added.
When asked if he was concerned about a recession, Sunak replied he was anxious about inflationary pressures but optimistic about the economy’s future.
Shadow chancellor Rachel Reeves said Mr Sunak had “finally come to his senses” after his announcement in Parliament.
Some Conservative backbenchers criticised his manner of partially funding support through a windfall tax.
The chancellor has been accused of “throwing red meat to socialists,” according to Richard Drax. Craig Mackinlay referred to the tax as a “tripe.”
