Rishi Sunak is facing intense pressure from Conservative colleagues to take action in this month’s spring statement to alleviate the cost of living crisis, which has been dramatically exacerbated by the Russian invasion of Ukraine.
Asked about the impact of sanctions on Russia for consumers at home, the business secretary, Kwasi Kwarteng, told MPs on Wednesday he believed the public was “willing to endure hardships” in solidarity with the people of Ukraine.
But many Conservative MPs are privately and publicly urging the chancellor to do more to soften the blow, and one source suggested Treasury officials were already drawing up possible policy options.
Sunak’s February package of a £200 energy bill cut, to be paid back over five years, and a £150 council tax rebate had been criticised already as too meagre to cushion the blow significantly for many households.
New analysis by the Institute for Fiscal Studies (IFS) suggests the impact of the war on energy prices means those measures may now protect consumers from just a fifth of the coming increase. “Living standards will suffer across the board,” they warn.
The IFS calculates that providing the same level of protection as Sunak had planned would now cost an additional £12bn. Its director, Paul Johnson, said the chancellor must make a “huge judgment call”.
“Will he do more to protect households from the effects of energy prices which have risen even further in the last two weeks? If he doesn’t then many on moderate incomes will face the biggest hit to their living standards since at least the financial crisis. If he does, then there will be another big hit to the public finances,” he said.
Treasury sources rejected the idea of ditching the national insurance increase due to come into force in April and said the spring statement would be “policy-light”, but did not rule out Sunak taking further action on living standards.
The Labour leader, Keir Starmer, used prime minister’s questions to repeatedly link the cost of living crisis to the impact of the invasion of Ukraine. He called for more direct help to cut energy bills, including a windfall tax on oil companies, but also demanded urgent action to reduce reliance on hydrocarbons, including an end to a de facto ban on new onshore wind projects.
Johnson dismissed the idea of a windfall tax, saying: “The net result of that would be to see the oil companies put their prices up yet higher, and make it more difficult for them to do what we need them to do … and that is divesting from dependence on Russian oil and gas. That is the way forward for this country – it is to take a sober, responsible approach.”
Starmer responded with derision, saying: “I don’t think the prime minister understands the mess he’s in.”
During a later statement by Kwarteng about phasing out Russian oil, Conservative MPs underlined the scale of the challenge, with the former housing secretary Robert Jenrick warning: “I think we have to brace ourselves for the greatest impact on living standards that any of us have known in our lifetimes.”
Robert Halfon, the chair of the education select committee, pressed ministers to echo Ireland’s approach of cutting fuel duty. “We must, must do the same,” he said. “Prices at the pumps are reaching £1.60 per litre for hard-pressed motorists. They’re paying around £16 more than a year ago. Hauliers are paying more than £120 every time they fill up at the pumps, and this is literally unaffordable for many people.”
The North East Bedfordshire MP, Richard Fuller, called on the government to do more to insulate homes in an effort to reduce energy demand.
The former business secretary Andrea Leadsom told the Guardian no option should be ruled out – including a tax on the energy companies, which have been making record profits.
“The chancellor will no doubt be looking carefully at further steps in addition to the energy support he has already put in place,” she said. “In such unprecedented times, every solution should be on the table – from an urgent focus on home insulation to rapid deployment of batteries to store wind and solar power and even to short-term ramping up of production in the North Sea basin and further taxes on big oil companies.”
Sunak has been holding roundtables with backbench Conservative MPs to discuss ways to alleviate the impact of rising energy bills, though one attender said the chancellor had stressed the parlous state of the public finances.
Speaking this month after giving a lecture at the London School of Economics, Sunak appeared to acknowledge that more might need to be done.
He pointed out that part of the cost of living support package will continue to help consumers into the autumn, but added: “As ever part of my job is always to be listening to people and making sure the policies that we’ve got in place are the right ones to help the economy, to help families and people can judge me on my track record about how we do that.”
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Sunak under pressure to react to cost of living crisis in spring statement
