Thank you for contacting me about the cost of living.
I understand anxiety over rising prices and inflation. I want to assure you that the Government will continue to listen and to ensure that the policies in place do help those who need it most.
I have made my ministerial colleagues aware of my constituents' concerns and I strongly welcome the range of measures put in place, including the new three-part plan to help households with their energy bills during this challenging period.
Several external factors have driven inflationary pressures. In particular, shortages created by the reanimation of the global economy and global energy price spikes brought on by the inability of supply to keep up with demand and the Russian invasion of Ukraine. This has been particularly acute when it comes to the price of wholesale gas.
Since Ofgem’s confirmation of the price cap rise, which is now in effect, the Government has put forward a three-part support package to help both lower and middle-income earners with the immediate adjustment. This includes a grant for energy bills for all which the Chancellor has not only recently doubled to £400, but he has also cancelled the clawback mechanism meaning this will not have to be repaid. Further, a non-repayable £150 cash rebate is being provided for homes in Council Tax bands A-D, equivalent to 80 per cent of all households and £144 million of discretionary funding for local authorities to support those not eligible for the council tax rebate. This means that hard working families will receive £550 with lower income families receiving even more help.
Discretionary Funding (Utility Bills): £144 million of discretionary funding is being made available for local authorities to support households not eligible for the council tax rebate – including properties in bands A-D that are exempt from council tax, and households on lower incomes in higher bands. I also welcome the increase in the Warm Homes Discount to £150 while extending eligibility by a third to reach 3 million vulnerable households.
A rise in the National Living Wage will mean an extra £1,000 in the pockets of millions of people. The Government has also cut the Universal Credit taper rate and increased work allowances - which represent an effective tax cut for low income working households in receipt of UC worth £2.2 billion in 2022-23.
Furthermore, I welcome that the National Insurance personal threshold will rise further from £9,500 to £12,570 from July 2022. This will bring it in line with the equivalent Income Tax personal allowance and represents the largest increase in a personal tax threshold in British history, equivalent to a £6 billion tax cut for nearly 30 million workers and worth over £330 a year starting in July, across the entire UK. This represents the largest single personal tax cut in a decade.
I will be working with my Parliamentary colleagues to ensure the Government continues to help ordinary households up and down the country as our economy continues to recover from the shock of Coronavirus and the measures taken in response.
Support for those in receipt of certain benefits: I welcome the Chancellor's announcement of new support to help those in receipt of certain benefits. Recipients of means-tested benefits such as Universal Credit and Pension Credit will be eligible to receive a £650 cost of living payment. Pensioners in receipt of the Winter Fuel Payment will receive an extra £300 this year to help them cover the rising cost of energy this winter. Those in receipt of disability benefits will receive £150 cost of living payments. I believe these will be paid from September. Additionally, households will get £400 of support with their energy bills through an expansion of the Energy Bills Support Scheme, as well as £1.5 billion of support being made available through the Household Support Fund. In addition to the council tax rebate announced in the Spring Statement, the support is worth up to £1,500.
Fuel Duty: I understand the burden that many commuters face, which is why I welcome the decision announced at the Spring Statement to cut fuel duty by 5 pence for a full year across all fuel duty rates.
Gas prices: Global gas prices are high due to various factors, including an increase in demand following the end of lockdowns in various countries and in return economies reopening, a cold winter in the UK, high demand in Asia for liquified natural gas (LNG) transported globally by freight which has meant that far less LNG has reached Europe, and weather events in the US limiting supply to Europe. With reduced variety of supply globally and much higher than anticipated demand, high wholesale gas prices have subsequently driven an increase in wholesale power prices, with a number of short-term markets trading at, or near, record levels.
I am glad that the Government is clear that protecting consumers, particularly vulnerable consumers or those on low incomes, is its main priority. As such, the Government has reassured consumers that it is committed to the energy price cap and it will remain in place, protecting around 15 million customers up to £100 a year.
Affordable food: I am pleased that the Government continues to work with business to ensure that we have access to safe, nutritious and affordable food from a wide range of sources, particularly from British farmers. As you may know, ministers commissioned an independent review into the food system. Part One of that review was published in July 2020 and it gave recommendations to support this country through the turbulence caused by the COVID-19 pandemic. Part Two of the independent review was published in July 2021 and sets out proposals for measures to combat obesity and improve overall health of children and adults, as well as proposals for specific initiatives to educate children about nutrition at school. The forthcoming Government Food Strategy will set out the Government’s ambition and priorities for the food system, considering the evidence set out in the independent review and building on additional topics. Collaboration is happening across Government to cover the entire food system and consider the unforeseen challenges that the agri-food sector has faced this last year since the independent review was published.
Interest rates and Inflation forecasts: I have ensured ministerial colleagues are aware of my constituents' concerns about the cost of living and set out below some of the context and action the Government has taken so far.
At its meeting ending on 4 May 2022, the MPC voted by a majority of 6-3 to increase Bank Rate by 0.25 percentage points, to 1 per cent.
The Office for Budget Responsibility expects inflation to remain elevated across 2022 and 2023. I have spoken with colleagues at the Treasury who are committed to price stability, and the Chancellor re-affirmed the Bank of England's 2 per cent consumer price inflation target at the Autumn Budget 2021.
Impact of Russian invasion of Ukraine: Inevitably, there will be an economic cost in Britain as a result of the tough sanctions package levied against Russia. However, I believe that the price of not standing up to Putin would be far greater.
Windfall Tax: The Government argues that oil and gas companies are currently seeing extraordinary windfall profits due to global spikes in commodity prices, driven in part by surging demand after the pandemic and Russia’s war. As a result of high energy prices, millions of households across the UK are struggling to make their incomes stretch to cover the rising cost of living. That is why the Government has introduced a Levy which will be charged on profits of oil and gas companies at a rate of 25 per cent, on top of the existing 40 per cent headline rate of corporation tax, raising around £5 billion over the next year to support households. It will be temporary, and as the oil and gas price decreases to normal levels, the Levy will be automatically phased out.
Thank you again for taking the time to contact me.
Craig Whittaker MP
June 2022