Boris Johnson admits energy bill discounts won't help everybody, as Political Correspondent Carl Dinnen reports
The £21 billion emergency support package is a “big bazooka” that should get the country through until energy prices begin to abate, Boris Johnson has said, but admitted it will not "fix everything for everybody immediately".
It comes as the government faces criticism, with claims the support was announced to deflect from the damning Sue Gray report into illegal parties held at Downing Street over lockdown, which was published on Wednesday.
Speaking during a visit to Stockton-on-Tees, the prime minister acknowledged there was a “bumpy time” ahead but said that the UK will be in a “much, much stronger position” as the pressure on global prices ease.
“What we are doing now is making sure we support people through tough times," he said, calling the support announced by the government "a big bazooka".
“I’m not going to pretend that this is going to fix everything for everybody immediately," the PM said.
“There is still going to be pressure but it is a very, very substantial commitment by the government to getting us through what will be still be a bumpy time with the increase in energy prices around the world.
“What I think it will also help us to do is to get us through until, I believe, the prices will start to abate and we will be in a much, much stronger position.”
'I’m not going to pretend that this is going to fix everything'
Rishi Sunak, meanwhile, insisted he did not time the cost-of-living support to deflect from the controversy over lockdown parties.
The chancellor bowed to demands for the UK government to step in and help households to deal with ballooning energy bills and rising shop prices, which are being fuelled by 40-year-high inflation, by revealing an emergency package of extra cash for millions of people.
Mr Sunak confronted criticism that the measures were announced as part of a plan to move the focus on from rule-breaking in No 10 following the publication of senior civil servant Sue Gray’s report on Wednesday.
The report contained a photograph of Mr Sunak attending Boris Johnson’s surprise birthday bash in the Cabinet room in June 2020, for which the chancellor and the prime minister were both fined £50 by the Metropolitan Police.
In an interview with Martin Lewis, founder of the Money Saving Expert website, the chancellor was asked whether the fiscal measures had been quickly unveiled to act as a “fig leaf” after embarrassing details of the late-night raucous parties in Downing Street were laid bare.
He replied: “I can categorically assure you that that had no bearing on the timing for us announcing this support, and I can give you my absolute assurance on that and my word.
“The reason we acted today was because we had more certainty about what will happen to energy prices in the autumn.”
The chancellor would not comment on whether Downing Street cleaning and security staff are paid fairly, ahead of protests over damning revelations in the Sue Gray report
The chancellor told ITV News he was "shocked and appalled" to read those elements of the report and said "that behaviour is not acceptable" - but refused to comment on whether they are paid fairly.
"As someone who lives in Downing Street, know many of these people, they do a marvellous job and they're marvellous with my kids so I'm very sad to hear about what happened," he added.
The chancellor further denied that he had "rushed out" the cost of living package before finishing his tax plans because he is unsure about whether to tax electricity generators.
He said his aim was to "give people reassurance" and felt he could do so following Ofgem's announcement that the typical annual household energy bill is forecast to rise by more than £800 in October when the price cap goes up, having already risen by more than 50% in April.
The chancellor defended offering every household - even the richest - the £400 payment, but vowed he would give his portion to charity
Every household will receive a £400 energy bill discount while extra support was also unveiled for the lowest paid, pensioners and those with disabilities.
When pressed on why every household - including the richest - needs £400 he said "lots of people on ordinary incomes" are struggling with the cost of living and the government wanted to offer something more universal.
He said he would give his £400 away to charity.
Shadow Chancellor Rachel Reeves told ITV News she was concerned some of the richest could end up with more than £1,000 in support by receiving the discount across multiple properties.
'The timing of the report yesterday I think owes more to Sue Gray's findings' - Rachel Reeves
She said although she 'welcomes' the package of measures "it took a long time for the chancellor to get there and in the meantime a lot of people have had sleepless nights".
"The timing of the report yesterday I think also owes more to Sue Gray's findings than it does the treasurer having worked on this for months and as a result, there are things in the package of measures that are of concern," she added.
Measures announced by the chancellor in the Commons included a one-off £650 payment to low-income households on benefits, paid in two instalments in July and the autumn at a cost of £5.4 billion.
Under the plans, almost all of the eight million most vulnerable households could receive at least £1,200 of support, including a previously-announced £150 council tax rebate.
Pensioners will also receive a £300 payment in November/December alongside the winter fuel payment in a move costing £2.5 billion, while £150 will be paid by September to individuals receiving disability benefits.
Mr Sunak announced that £5 billion of the package would be paid for by a levy on the profits of oil and gas giants, and around £10 billion will be covered by extra borrowing.
The chancellor attempted to avoid calling his plan for a 25% energy profits levy a “windfall tax”, as he was accused by Labour of having been dragged “kicking and screaming” into a U-turn on the policy the opposition has spent months calling for.
But Simon Clarke, chief secretary to the Treasury, conceded it was a windfall tax, although one he said included a “carefully calibrated offer” due to its tax break incentives for companies to invest in North Sea oil and gas production.
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Conservative MPs, including Richard Drax, publicly voiced concerns about the windfall tax in the Commons, suggesting it amounted to “throwing red meat to socialists”.
Mr Clarke defended his boss’ approach, however, pointing to where windfall taxes had been used in the past by Tory administrations, including by former chancellor George Osborne and ex-prime minister Margaret Thatcher.
He told BBC Radio 4’s PM programme: “The point is that when you initiate it you need to be really careful for it not to have perverse effects and perverse consequences as a result, and that is something we have done.”
The Times and The Telegraph reported that Jacob Rees-Mogg, minister for Brexit opportunities and government efficiency, warned during Thursday’s Cabinet meeting that the tax could hurt investment.
Mr Rees-Mogg later told Sky News that all taxation has an “economic consequence”.
He said: “Whether it’s a pasty tax, or it’s an excess profits tax, there is an economic consequence.
“There isn’t a honeypot of free tax that governments can just pop into.”
When announcing his fiscal package in the Commons, Mr Sunak told MPs it was worth £15 billion.
But officials later conceded that there was a hidden £6 billion cost to the announcement, taking it to £21 billion.
That is because over the next five years the original £200 rebate for energy bills, which was announced in February and doubled and turned into a grant by the chancellor on Thursday, will no longer be paid back by consumers as originally planned.