5 hours ago
9
Rachel Reeves has ruled out universal support to deal with any future rise in energy bills, saying any government help would be targeted, and criticised the support offered by Liz Truss’s government as unaffordable and irresponsible.
The chancellor also said she would review the planned fuel duty rise in September, but did not commit to delaying or postponing it.
She said contingency planning was taking place for an expected rise in energy bills but the focus was on longer-term measures to bring down bills for all, and targeted support for the poorest households.
“The previous government pushed up borrowing, interest rates, inflation and mortgage costs with an unfunded, untargeted package of support under Liz Truss. That gave the support to the wealthiest of households,” Reeves said. “That left us with high levels of national debt, a cheque written then for a bill that is still being paid today.”
She said any support would come “within our iron-clad fiscal rules to keep inflation and interest rates as low as possible”.
Reeves said the focus of the government for now was a de-escalation of the US-Israeli conflict with Iran, as well as warning companies not to profiteer from the crisis.
She said she would meet supermarket and bank bosses this week “to discuss how they can further support their customers” and that ministers would ensure the Competition and Markets Authority “have the powers that they need, that were denied to them by the previous government, to detect and to crack down on price gouging”.
Reeves said she would “update on fuel pricing within the next month” amid speculation that the government could cancel or delay the planned fuel duty rise from September onwards.
She said the government would lay legislation after the next King’s speech in May to implement John Fingleton’s review into nuclear energy deregulation, saying it would be fast-tracked to allow new plants to be built sooner.
Challenged by the Liberal Democrats over whether she would take even wider action if energy bills rose as predicted by more than £400, Reeves said she believed targeted support would be better.
“I argue that the progressive, universal approach that we’re taking is the right one – £150 off everyone’s energy bills [from measures in November’s budget], but then targeted support for those who need it most,” she added.
Her immediate predecessor as chancellor, Jeremy Hunt, who replaced Kwasi Kwarteng as chancellor in the wake of the market crisis that followed Truss’ mini-budget, said Reeves should not fund any support via more borrowing.
“Although last time, we gave support to households and families with her support by increasing borrowing, we cannot react to every single economic shock by further increasing our national debt,” Hunt said.
Reeves said the previous system of an energy subsidy meant public money had helped those who were the most well off. “A targeted approach would be more appropriate because the top third of families under the previous approach got more than a third of the benefit. That’s not right. It’s not sensible, and all it does is drive up inflation, interest rates and taxes in the future,” she said.
“So it’s not the fault of the former chancellor that approach was taken, but we are using this period when energy prices are actually falling – because of the approach I took in the budget – to ensure that we are in a position in the autumn to have a targeted approach.”
Thinktanks including the Resolution Foundation have suggested the government develop new social tariffs for poorer households rather than offer a broad-based subsidy, saying it would cost about £3.7bn a year to give the poorest households £300 off their bills.
Ruth Curtice, the Resolution Foundation’s chief executive, said: “The chancellor is right to say that the government will look to target support with energy bills at families that need it the most, rather than repeat the blank cheque approach of the last crisis. It’s essential we avoid schemes with uncapped costs that can lead to a doom loop of higher interest rates and higher borrowing.”
But the Green party said Reeves should be looking at much more significant interventions to prevent people from crisis. The party’s leader, Zack Polanski, said: “This is an unbelievably weak response from the chancellor to the enormous bill hikes facing households in the UK. Monitoring the situation? Considering new powers?
“Reeves’s lukewarm words show that she and her government simply do not understand the scale of the cost of living crisis about to hit this country.”
