‘How much misery can we allow?’


In early February Rishi Sunak announced a £ 9 billion support package designed to help remove the sting worrying increase in energy bill. Fast forward a month, and it already seems outdated, overshadowed by the extent of predictions about energy price increases coming for families and businesses. As letters land on doormats informing households that their bills will rise to more than £ 2,000 a year, experts already predict that these will hit £ 3,000 to £ 4,000 by the end of 2022.

Government insiders privately admit that there is not much they can do to ease the cost of living in the short term. And there are those who argue that it is logical given the rapid nature situation in Ukraine And its impact on energy prices Chancellor to keep his nerve at least until later in the year. As one MP put it, “Someone could shoot Putin tomorrow, and it’s all over, even if it’s incredibly optimistic.”

Conservative MPs is, however, increasingly concerned about the impact that even higher bills will have on voters, and lobbies for some form of security. One said it would be “bizarre” for Mr Sunak to at least not acknowledge the situation that unfolded in his spring statement later this month, though he postpones announcing significant handouts for later.

“We’ll have to do more,” said one Tory backbencher. “Those who say otherwise do not represent places where people will be most affected.”

“I suppose he thought they had done what they were supposed to, and then it would be normal again in the fall,” said another. “Now inflation can hit as high as 10 percent and stay there for a few years, which would be terrible. It will hit fuel, bills and food prices. The government should think of something else.”

Ministers argue previously announced energy price ceiling, and rises to the national wage, will protect people from the worst gas price rise. A source close to Trade Minister Kwasi Kwarteng said: “In the very, very short term, the first thing we need to recognize is that the UK is part of a global market and no government can control the price of gas. What we can do is is to protect consumers to help mitigate the impact, and that is what we have done with the Chancellor’s support. “

Boris Johnson and Chancellor Rishi Sunak visit Octopus Energy’s headquarters in 2020 (Photo: Getty)

The source pointed out that when the price ceiling rises next month, UK consumers will still pay around a quarter of the domestic energy market price. “The most important lever we have is the price cap. At the moment, people are paying 63p per term [unit of heat energy] when the wholesale price is around 500p. When the cap is lifted, this will increase to 127p. “

It told a Downing Street official I: “We have added the package to April and we think that’s enough. ”
But will that be enough for what comes further down the track? The ministers’ view is that it may be largely pointless to try to predict what the market price of gas will be later in the year when the ceiling is revised. “Things are fluctuating so much that it would not make sense to try to make plans for a few months from now,” the official added.

Some believe an extension of the tax rebate scheme announced last month will be outlined in October. But Mr Sunak must avoid a double hit for the Treasury by announcing another multi-billion pound package, months before the government is pushed into increasing benefits, pensions and public sector wages in line with inflation, which is expected to be around eight percentage.

“If the chancellor has ambitions,” a Tory MP said. “He wants to be seen as generous, and he seems to like cash dividends.” But they questioned whether Mr Sunak would choose to pay people’s bills now and then be forced to allow wage and benefit increases during inflation for two years, just as the country is preparing for the next election.

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The background suggested that one solution would be to offer half of an eight percent increase for benefits and pensions in October, and the other half in the spring of 2023 – four percent at a time.

“Benefits and pensions must keep up with inflation. I’m not sure you can tell a retiree that here’s a three percent increase to keep you going through next winter, but raising it and treating it as a payout for next year’s increase could be a way to do it on, ”they said.

“It’s hard to think about how much money you will throw after it in terms of how much misery you will allow,” they added. “And how long will people pay more for a war that we are not even in and cannot win. How long will it take before they lose interest and are more interested in the price of their fuel?”

Political experts say the government in the short term can do little more than encourage people to cut energy consumption to conserve resources and launch efforts to shift away from dependence on gas and oil. The idea of ​​an “energy-saving” campaign was ruled out by a government official, and Whitehall sources say any immediate measures to save energy or increase gas storage will put some pressure on Vladimir Putin without coordinated action across Europe.

A source claimed that countries such as Germany had become too soft on the Kremlin because of their need to obtain gas from Russia. “As countries have become more dependent on Russian energy, it has affected their response to the conflict between Russia and Ukraine,” they said.

Sir. Kwarteng and Secretary of State Liz Truss are leading the work of the Cabinet with a long-term plan, with part of the strategy to be announced by the Prime Minister early next week. The Secretary of State has lobbied his G7 colleagues, including US Secretary of State Antony Blinken, to adopt a binding ceiling on how much of their energy supply comes from Russia and the amount falls according to a predetermined schedule.

An ally said the so-called “Truss Plan” would “dampen the economic impact and give countries time to adapt”, adding: “Basically, Liz believes we need to accustom Europe and the free world to Russian oil, coal and gas, and the best way to do that is to have some kind of international agreement. “

Mrs Truss has also asked the Foreign Ministry staff to draw up proposals for a compensation scheme which will make countries in Central and Eastern Europe receive direct payments to compensate for the economic hit by abandoning Russian energy.

And there is consensus, supported by Boris Johnson, that the next most important step is to accelerate investment in renewable energy, North Sea oil and gas and a new generation of nuclear power plants.

Luke Murphy, of the Institute for Public Policy Research (IPPR), said: “The two most important things to do in the medium to long term are to invest significantly in a serious national energy efficiency and heat pump program so that people consume less but cleaner energy, and accelerate progress towards its commitment to decarbonise the electricity grid by 2035. “

He added: “We are paying the price for a decade of tremors and delays and the failure to have the ambitious policies needed to reduce our dependence on fossil fuels. The Ukraine crisis has brutally exposed these failures, but it is not too late.”

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