Economy Update — House of Lords, 2022-05-26
Topic: Macroeconomics
Susan Kramer (Liberal Democrats, Centre to centre-left): My Lords, I honestly do not think anybody in this House is seriously fooled. The announcements by the Chancellor today, including the U-turns on a windfall tax and increasing benefits, are basically covering fire for Boris Johnson and his disgraceful role in partygate. The timing gives it away. People have been suffering from a cost of living crunch through much of this winter, making an appalling personal decision on eating or heating. They have needed that help The Chancellor says today that he did not know until yesterday that the energy cap would go up by £800 in October. He must be the most out-of-touch person in the country. He could have talked to anybody, on any street, and they would have told him not only that the cap would go up but the amount I do welcome today’s package. Anything is needed when a crisis is this urgent and desperate, but one of my concerns is that it covers only the increase in energy costs. The Chancellor’s own speech explains that the average increase in people’s energy bills this year will be just under £1,200. He goes on to say that this is "the same amount as our policies will provide for the most vulnerable people this year." There are other serious pressures, notably the increase in food prices, which are falling most on people on the lowest incomes. I wonder whether the Minister will tell us what experience ordinary people will have and how much more per week it will cost them to deal with those higher food bills. That problem is desperately acute There is nothing in here for businesses. I took a quick look at the response from the response from the British Chambers of Commerce, which is usually a very modest group that is always likely to welcome—and does welcome—the actions of the Government. It states: "For business, the toxic mix of inflation, raw material costs and supply chain disruption", largely from Brexit, "is the flip-side of the coin to the problems facing consumers. Unless steps are also taken to ease business costs, they will likely feed into the inflationary pressure on the economy and quickly eat into the financial support announced today." We must not forget that individuals are also facing significant increases in taxes. National insurance contributions are going up 1.25% and, because thresholds have been frozen, many people will find that their income tax bill is shockingly higher than they ever anticipated I would like to understand more about why the Chancellor has chosen not to go further. He is going to see £7 billion coming in today from the tax on oil and gas. I agree with others that the oil and gas companies can very much afford to do that. I note that they still plan share buybacks and saw nothing in the market to suggest that that has changed. BP is not cancelling its planned £8 billion in share buybacks this year, nor Shell its £6 billion in announced plans. The Chancellor also now has £8.6 billion in extra VAT due to inflation this year, rising to £40 billion by the end of the Parliament. With that kind of windfall coming into the Treasury itself, there is scope to do a great deal more I join others in my party who have called for a cut in VAT, because that would stimulate business, particularly small businesses; take pressure off companies that thought they were going into clear waters coming out of Covid but are now wondering if they are going to survive; and help those on the lowest incomes deal with this severe increase in food prices. Essentially, it is largely paid for by the extra revenues that flow into the Treasury thanks to inflation. Can the Minister explain why that has not happened and why, under those circumstances, the Government are absolutely determined to go ahead with their increase in national insurance contributions, which is going to diminish the pay packet of virtually every working person in the country?