There is a cost of living triple whammy hitting the UK. Energy prices are rocketing. The Tories are imposing new tax rises. And real wages are falling.
As the Bank of England has confirmed, these factors are set to hit household incomes harder than anything has for decades.
The announcement from the energy regulator, Ofgem, that the energy price cap is to go up by a stunning £693 will come as a body blow to many households in constituencies like mine.
Labour saw this problem coming and has been calling for action for months. At the turn of the year we produced a package that would give everyone £200 off their bill with a further £400 off for the poorest 8m households. We would pay for this partly through the increased VAT receipts the Government is enjoying because inflation is higher than expected and partly through a windfall levy on the profits of the oil and gas companies who are making the most from the rise in global gas prices.
The Labour plan is fully costed, gets more help to the poorest households and is funded in a fair way.
If you want a sense of the size of the profits being made by energy companies look at Shell’s financial results released today. Their annual profit last year quadrupled to $20 billion in what the Chief Executive described as a “momentous year”. His rival at BP described the current market as a “cash machine” for his company. Labour thinks it is only fair that these companies pay something back to help relieve the huge bills consumers are facing.
The Chancellor’s package falls short of what is needed in three important ways.
Firstly, the money off the bills is in effect a Buy Now Pay Later scheme involving exchanging reduced bills this year for a £40 surcharge on bills for the next year – and it is contingent on prices falling next year – something that is by no means certain.
Secondly, it gets a lot less help to the poorest households than Labour’s plan. Whereas our plan would reduce the bills for the poorest by £600, the Tory figure is £350, leaving the poorest still facing much higher bills.
And thirdly, the Chancellor asks nothing of the companies making the most from this crisis. His funding comes entirely from bill payers over the next five years and taxpayers in general.
His is a less generous package funded in a less fair way.
Even with this package, the combination in the triple whammy of price rises, tax rises and falling real wages still adds up to a very tough year ahead when it comes to the cost of living and household budgets.
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