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Rishi Sunak insists he’s a ‘pragmatist’ amid criticism of rising taxes and spending

·Finance Reporter, Yahoo Finance UK
·5 min read
British Chancellor of the Exchequer Rishi Sunak leaves Millbank Studios after a media interview in London, Britain, May 27, 2022. REUTERS/John Sibley
Rishi Sunak insists he’s a ‘pragmatist’. Photo: John Sibley/Reuters

UK chancellor Rishi Sunak insisted he remains a “pragmatist” as he refused to rule out another emergency package as UK households struggle to pay bills amid soaring inflation.

Asked if he is prepared to return with another emergency package next year even if it requires more borrowing and taxes, Sunak told BBC Radio 4’s Today programme: “People can judge me by how I’ve acted over the last couple of years.

“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.

“In terms of ‘is it one-off?’, what’s happening next year, I’d go back to what I said earlier. 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.”

The cost of the extra support for energy bills will be partly offset by a 25% additional tax on oil and gas firms' profits, which have soared in recent months.

Read more: Rishi Sunak unveils £15bn aid to help UK households struggling with rising energy bills

He refused the idea that he his raiding the honey pot of business and that the measure would ultimately see the public pay more tax.

“I am first and foremost a pragmatist and I am responding to the circumstances that I face.”

He added: “What we announced today is a new levy that as I’ve said, fairly taxes these profits but also comes with a brand new investment relief that has been described as very generous because what it means is that when those companies invest more, they’ll pay less tax with double the amount of relief that is available to them.

“For every pound they invest, they’ll get over 90% of that back in tax relief. As I said, it gets the balance right."

The Institute of Fiscal Studies think tank has warned that another high-spending emergency package might be required amid spiralling bills.

The think tank said calls for help were likely to continue for "at least" another year if oil and gas prices do not fall.

"If oil and gas prices remain high then the government will doubtless come under pressure to continue the additional household support for at least a further year," IFS deputy director Carl Emmerson, said.

The chancellor also told Radio 4 that the surge in energy prices, and the UK’s tight jobs market, were pushing up inflation.

“We are experiencing inflation pressures from both a tight labour market, although that is something to celebrate, but also the energy price shock. I’m very confident about the outlook for our economy over time.”

Sunak said his new emergency cost of living package will have a “minimal” impact on inflation which will be “much less” than 1%.

Read more: 1 million pensioners risk missing out on Rishi Sunak’s one-off £650 payment

He told Sky News: “Our estimate, and my view, is it will have a minimal impact on inflation.”

Asked if it could be as high as 1%, he replied “no, much, much less than that, minimal”.

He argued that was the case because the help is “very targeted” at those who need it most while money is being raised to pay for the measures.

The chancellor also said that welfare recipients can “feel relatively confident” that it is “likely” payments will increase next year in line with this year’s high inflation.

He told BBC Breakfast: “Looking forward, what is likely to happen is that benefits and pensions next year will go up by this year’s much higher inflation levels.

“That is forecast to be much higher than the inflation that people will actually experience next year. So, for all those people they can look at next year and actually feel relatively confident about that.”

He also suggested wealthy individuals who do not need the £400 energy bills grant can “join me” in donating the sum to charity.

He told ITV’s Good Morning Britain: “I’m sure you will join me in giving that money to charity.”

Rishi Sunak’s £15bn cost of living package may only be a temporary plaster, the CEBR think tank warned.

CEBR said the measures will help struggling families in the cost of living crisis, but more would be needed next year unless energy prices fall back: "Under the support measures announced this spring (both in February and this month), bottom-income-decile households in England are estimated to receive just under £1,200 in help, more than £800 of which comes from the latest package.

Read more: FTSE 100: BP to review investments in North Sea after Sunak's windfall tax

"As such, the support announced will go a significant way in protecting the very poorest from the energy price shock. However, further targeted support will likely be needed if prices do not fall in spring 2023, meaning that the sizeable spending commitments made so far this year may prove to be a temporary plaster."

Sunak's decision to help families through one-off payments means some are facing "rough justice", the Resolution Foundation has said.

The think tank said the approach taken by the chancellor means there are "cliff edges" on who receives support and the money being handed out is "not always well-targeted towards those whose bills are rising the most".

It said: "Among working-age households receiving means-tested benefits, households with three or more children will see energy bills pushed up by £500-plus a year more than those without children, but will get the same one-off payment."

Watch: Sunak defends universal grant policy to help with energy bills

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