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‘Big bazooka’ support package will get UK through energy crisis, says PM
27 May 2022, 13:54
Boris Johnson said the country faces a ‘bumpy’ time but should emerge in a ‘much, much stronger position’ as global price pressures abate.
Boris Johnson has said the Government’s emergency cost-of-living support package is a “big bazooka” which will support families until the surge in energy prices abates.
The Prime Minister acknowledged the country still faced a “bumpy time” due to the soaring costs of oil and gas, but said he was confident it would emerge in a “much, much stronger position”.
Earlier, Chancellor Rishi Sunak – who on Thursday announced a further £21 billion of support for households – indicated that he could not rule out the need for further measures if global prices remain high.
But speaking during a visit to Stockton-on-Tees, Mr Johnson appeared to suggest the measures set out in the Commons – with up to £1,200 for eight million homes across the country – should be enough.
“What we are doing now is making sure we support people through tough times. It’s a big bazooka,” he said in a pooled clip for broadcasters.
“I’m not going to pretend that this is going to fix everything for everybody immediately. 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 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.”
While some Tories welcomed the Chancellor’s latest support package, others expressed concern that it will be part-funded by a £5 billion levy on the profits of the energy companies.
With Labour having been pressing for months for a windfall tax, MPs complained it was “throwing red meat to socialists” and would damage investment in the sector.
There were also concerns that a £400 discount on energy bills for every household in the country, regardless of how well off they are, would further fuel inflation which is already heading towards 10%.
Paul Johnson, director of the Institute for Fiscal Studies, said while the impact of a one-off series of measures would be limited, the Chancellor could come under pressure to repeat it in future years.
“I think the biggest risk here is that the Chancellor will be tempted to do this again and again. If that happens then we really could be in for a bit of trouble,” he told the BBC Radio 4 Today programme.
“He has got the most extraordinarily difficult decisions to make later this year on public sector pay and then he will be under pressure, I suspect, come this time next year – when energy prices will still be high and households will be struggling – to put more money in.”
Mr Sunak insisted he remained a “fiscal conservative” and was committed to managing the public finances “responsibly”, but he refused to rule out another emergency package next year.
“People can judge me by how I’ve acted over the last couple of years,” he told the Today programme.
“I’ve always been prepared to respond to the situation on the ground, what’s happening to the economy, what families are experiencing, and making sure we’ve got policies in place to support them through that.
“I do want people to be reassured and confident that we will get through this. We will be able to combat and reduce inflation, we have the tools at our disposal, and after time it will come down.”
Labour shadow chancellor Rachel Reeves said the Government had “finally come to their senses” over the windfall tax but said ministers needed to think about measures to ensure they were not in the same position next year.
“The Government could be starting a big programme of home insulation right now to take money off people’s bills – not just for one year but for years to come,” she told BBC Breakfast.
Under Mr Sunak’s plan, 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.
The measures include 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.
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 said £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.
Announcing the measures in the Commons, Mr Sunak told MPs it was worth £15 billion, but officials later conceded 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.