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Rishi’s just given us a fighting chance of avoiding recession

by Alex Brummer CITY EDITOR

RISHI sunak has dug deep. The cost of living package he announced yesterday will pour more than £21billion into people’s pockets – with the least welloff receiving the most help.

In effect, what the Chancellor has announced is ‘helicopter money’ – cash handouts to ordinary citizens. Nothing else, it seems, could give the immediate help they need to get through this economic crisis. Britain’s economy – like those across the world – has been hit by disaster after disaster.

A surge in oil and gas prices was already taking place thanks to supply problems in the wake of the pandemic, but has been vastly exacerbated by Vladimir Putin’s barbaric invasion of Ukraine.

The price of energy affects every aspect of the economy, from food production to transport.

It is one of the main reasons why UK inflation has soared to an eyepopping 9 per cent in the 12 months to April this year.

But macroeconomics are only one side of the story. The fact is that sharply rising prices constitute a tale of misery for many families, especially the poorest.

This week, energy regulator Ofgem announced that the average household is going to watch aghast as its energy bill jumps to £2,800 in 2022 – well over double the £1,138 it was last year.

This is enough to drive families into debt and penury. The Chancellor was forced to act.

AS a result of these new measures, eight million poorer families should receive £1,200 extra this year (mostly through the welfare system) and that will make a huge difference to them. And don’t forget: this money will be given to poorer families along with their benefits. Gone are plans for £200 ‘loans’ to help pay energy bills, which Rishi clearly sees as a blunder. instead, people will receive grants that do not have to be paid back, and every household – even the richest – will have £400 taken off their bills. Let’s be clear: politics has played a huge part in this statement. Labour had been trumpeting the virtues of a windfall tax for weeks and public support for one stood high. Now oil and gas producers face a 25 per cent Energy Profits Levy to soak up their ‘windfall’ profits.

Separately, the clamour was becoming deafening from the Left and in sections of the media for the Government to give families hefty handouts to help with their soaring energy bills.

Sunak has seized an opportunity to shoot Labour’s fox – and be even more generous than his opponents. The £5billion he will raise from the windfall tax in the next 12 months is almost double the amount envisaged by sir Keir starmer and his shadow Chancellor Rachel Reeves.

And sunak is not even finished: he has threatened to hit the main UK-quoted energy suppliers – Centrica, SSE and National Grid – with the windfall tax, too, which could impair the value of their shares.

As a passionate believer in lower taxes, i would have preferred it if the Chancellor had spiked the national insurance hike brought in last month, as this paper has long advocated, and avoided punishing energy firms.

This Government should be encouraging investment in traditional oil and gas production as well as in renewables – and not helping itself to legitimate company profits, however exceptional they may be.

Sunak does seem to understand this – which is why he has promised tax relief to firms prepared to invest in Britain. Nevertheless, these are exceptional times and there is no doubt that they required a dramatic response. The risk of stagflation – high inflation combined with low growth or a slump – is real.

By spraying cash at the problem, the Chancellor has given the economy a fighting chance of avoiding a recession and job losses.

City analysts Capital Economics reckon the squeeze on incomes could now be halved to just 1 per cent – down from the widely predicted 2 per cent – which would have been the biggest fall for three decades.

With all that said, however, actions have consequences – and everything has a price.

HIGHER spending on welfare payments means fiscal policy – the amount of money the Government has to pump into the economy – will be looser than expected at the next budget, likely this autumn.

And that means in turn that the Bank of England may well have to move faster and further in raising interest rates in the war against inflation. in short, then, our energy bills may now be more affordable this year but our mortgages and other debt could well become more expensive.

So the short-term pain relief – however vital it is to help struggling families – could end up costing us all a lot more in the long run. And the next general election is not that far away.

UH oh. Rishi Sunak had that voice on again. The one that’s all soft and gooey, dripping with syrupy empathy. Back in the bad old days of the pandemic it used to get wheeled out every few weeks and only ever meant one thing: stand by for another costly spending spree.

Sure enough, the Chancellor was back at it again yesterday, tackling the cost of living crisis by spraying £50 notes around the Commons like a Formula One driver armed with a Nebuchadnezzar of the finest fizz.

A £400 rebate on energy bills. Cash handouts to the poorest. The total damage? Oh, just a trifling £21billion. Yup, you heard that right. Let that figure just nestle in your stomach for a bit. Twinges a tad, no? Gets the old gastric acid pumping.

Make no mistake, when our Rishi gets the credit card out he makes one of Rebekah Vardy’s all-day excursions to Bond Street look like a minor splurge.

How were we going to pay for all this?

Well, he hoped to raise a bit by walloping oil and gas firms with a windfall tax. Except he couldn’t call it that as he’s been poohpoohing Labour’s demands for one for weeks. Too much of a U-turn. And Rishi doesn’t like performing U-turns.

Instead, it was a ‘temporary targeted energy levy’, with heavy incentives for companies to invest. Labour’s front bench howled with laughter. Pensions spokesman Jon Ashworth kept drawing giant ‘U’ shapes in the air. Rishi’s voice was so honey-glazed at first, it was as if he was recording an advert for Unicef.

‘I know that people are worried. I know people are struggling,’ he simpered. ‘This is

a Government that never stops trying to help people, to fix problems where we can and to do what is right.’

Cue violins, Giovanni! Next to him sat the Prime Minister, a crumpled mess of a man with his clothes all skewwhiff and his tummy sticking out.

If I didn’t know any better, I would say Mr Johnson had only recently crawled out of bed. On the benches opposite, Labour MPs clucked excitedly like a giant shed of battery hens at feeding time.

After all, it was they who had come up with the ingenious idea of solving the cost of living problem by throwing bags of money at it and now wanted all the credit. Meanwhile, Shadow Chancellor rachel reeves swivelled impatiently on the edge of her seat – couldn’t wait to take to her feet and get going on the gloats and the childish ‘I-told-you-so’s’.

SOMe of her lines were lifted straight from the Tony Blair speech collection. ‘There’s no doubt who’s winning the battle for ideas in Britain,’ she bellowed in that unsettling bass trombone voice of hers, all stomping feet and Boudicca salutes. ‘Where we lead, they follow!’ Labour’s benches cheered. No, they really cheered, giving reeves a far better reception than they ever give Sir keir Starmer.

Speaking of Sir keir, he was there on the front bench chuckling away nervously whenever reeves made some joke at Sunak’s expense. It’s possible I’m projecting here but I’m not sure he’s totally au fait with economics.

The sheer size of the financial package being laid out before the house meant Labour MPs could only really complain that it should have been announced sooner. Several

suggested the announcement had been deliberately delayed until Sue Gray’s report on Partygate had been published.

Oh come, come. Purely coincidental, I’m sure. Not that it was enough loot for the Scots Nats. It never is. You could hand them half the Uk’s gold reserves and they’d still be demanding to remove whatever was left in the Chancellor’s teeth.

kirsty Blackman (SNP, Aberdeen N) complained today’s extra injection was ‘only £15billion’. The Tory benches exploded. ‘Only??!!’ The sole person to really question rishi’s plan was richard Drax (Con, S Dorset). he accused Sunak of ‘throwing red meat to socialists’ by raising taxes on businesses and telling them where to invest their money.

This is ‘not the Conservative way’ he warned. Indeed it isn’t. But this is the world in which we now live. Terrifying, isn’t it?

RISHI’S £21BN SPLURGE

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2022-05-27T07:00:00.0000000Z

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