Tories are now the party of big spending, says Sunak
Chancellor says his handouts are more generous than Labour would offer
THE Chancellor yesterday boasted of spending and taxing more than Labour would to help households through the cost of living crisis as he unveiled a £21 billion package of support.
Rishi Sunak announced £400 off energy bills for every household, plus payments of £650 for people on benefits, £300 for pensioners and £150 for those with disabilities.
The extra spending commitments were made as the Chancellor vowed to increase Universal Credit and state pensions next year in line with inflation – potentially costing another £15billion.
To help fund the intervention, Mr Sunak announced a windfall tax on oil and gas companies – confirming an about-turn on a policy the Government had opposed for months. But by the Treasury’s own estimates, the windfall tax will only raise about £5 billion this year, creating a black hole in its finances to be filled by more borrowing.
The help with the cost of living crisis was rushed out as Boris Johnson battled to shore up support in the wake of Sue Gray’s report into partygate and ahead of two crucial by-elections, one of which is in the red wall seat of Wakefield.
The package of measures is supported by many Conservative MPS, but others, particularly on the Right of the party, attacked the move as “red meat to socialists”. The decision to increase taxes on business and borrow to spend runs counter to Mr Sunak’s public promises to cut taxes.
Rachel Reeves, the shadow chancellor who has been pushing for a windfall tax for months, declared a policy victory in her response in the House of Commons. “After today’s announcement, let there be no doubt about who is winning the battle of ideas in Britain: it is the Labour Party,” she said.
Mr Sunak responded: “Because we were patient, we have been able to scale our support to the problem, which means that our proposals are in fact more generous than those offered by the Labour Party.” At another point, the Chancellor noted that Labour’s windfall tax proposal would only have raised £2 billion, while his policy would bring in £5billion in tax revenue.
He justified the package by saying the Government would not “sit idly by” as some people are hit so hard by the financial squeeze they “never recover”.
The spending package was much bigger than expected, though it will not fully insulate households from soaring energy bills set to increase by another £800 this autumn.
Think tanks noted that the measures represent an interventionist approach more often associated with Labour.
Mark Littlewood, the director-general at free market think tank the Institute of Economic Affairs, said that Ms Reeves had been right to call the package “a policy victory for Labour”.
Paul Johnson, the director of the Institute For Fiscal Studies, said that Mr Sunak was “engaging in some serious redistribution from rich to poor”.
However, the £400 off energy bills applies to each home, so a second home owner will get £800 in total. Mr Sunak, who is believed to own three UK homes, is therefore expected to get £1,200.
Many Tory MPS praised the measures after months pressing the Chancellor for financial help for constituents. But others raised concerns. Richard Drax, the Tory MP for South Dorset, warned: “Throwing red meat to socialists by raising taxes on businesses and telling them where to invest their money is not the Conservative way of encouraging those who create our prosperity and jobs to do just that.”
The windfall tax could remain in place until the start of 2026, with the Treasury saying it could go before then if prices return to “normal” but offering no specific promises.