Sunak hints at fuel tax cuts in cost-of-living crisis, but admits ‘It’s not going to be easy’

Government ‘can’t solve every problem’, says chancellor as households face average £700 hike in energy costs

Andrew Woodcock
Political Editor
Sunday 20 March 2022 15:18 GMT
Sunak promises to 'stand by' voters in cost-of-living crisis, but says 'It's not going to be easy'

Rishi Sunak has hinted he may cut fuel duty in Wednesday’s mini-budget, declaring that he does not believe prices at the pump should be “prohibitively expensive”.

Shadow chancellor Rachel Reeves said Labour would not oppose the move, which has been demanded by a group of 50 Tory MPs to ease the cost-of-living crisis hitting millions of families.

But Ms Reeves said that even a 5p-a-litre reduction in tax would not “rise to the scale of the challenge”, saving motorists just £2 each time they fill their cars at a time when domestic energy bills are set to leap £700. She called for a windfall tax on North Sea oil and gas giants to support low-income families, as well as scrapping VAT on domestic fuel bills and the reversal of Mr Sunak’s 1.25 percentage-point hike in National Insurance contributions (NICs).

Meanwhile, Money Saving Expert Martin Lewis warned of “panic” as up to 10 million people are forced into fuel poverty, and said political action was needed from the chancellor to save families faced with a choice between “starving or freezing”.

Days ahead of his crucial spring statement, Mr Sunak hinted he is ready to help families with soaring bills, but admitted: “I can’t solve every problem.”

The chancellor urged voters not to be “scared” by the looming cost-of-living crisis, and promised: “Where we can make a difference of course we will.”

But he appeared to acknowledge that whatever package he delivers will not be enough to cushion the blow of historic surges in the cost of petrol, heating and other essentials, telling voters: “It’s not going to be easy.”

Mr Sunak said it was clear that the UK’s sanctions on Russia in response to Vladimir Putin’s invasion of Ukraine were “not cost-free for us here at home”, after wholesale prices for oil and gas spiralled upwards.

“I want to be honest with people that it’s not going to be easy,” Mr Sunak told BBC1’s Sunday Morning.

“I wish government could solve absolutely every problem, that I could fully protect people against all the challenges that lie ahead.

“I can’t do that, but what I would say is I will stand by them in the same way that I have done over the past couple of years. Where we can make a difference, of course we will.”

Ms Reeves told Sky News’ Sophy Ridge on Sunday: “Wednesday is an historic moment for the chancellor, for him to show whether he really understands the challenges that people are facing at the moment.”

She cited parents who had told her they are skipping meals to ensure their children eat and pensioners who turn the heating off in cold weather to keep bills down.

“For those people and millions of others up and down the country, we need more than warm words from the chancellor,” said Ms Reeves. “We need the chancellor to do the things that will relieve that pressure on the cost of living.”

In a series of interviews ahead of his spring statement, Mr Sunak refused to reveal details of the package which he is planning to unveil.

He set his face once more against scrapping or delaying the NICs increase on employees and employers, due to come into effect in April.

And he poured cold water on foreign secretary Liz Truss’s plea for defence spending to be increased from 2 per cent of GDP closer to the 5 per cent levels of the Cold War era, saying that the military had already received generous increases in recent spending settlements.

But he left the door open to a rise in National Insurance thresholds to take the poorest out of the tax.

Defending his position as the chancellor who has increased taxes by the largest amount for at least 70 years, he said that none of his immediate predecessors had had to deal with war on the continent of Europe, a pandemic and the worst recession in centuries.

“We’ve had to take some difficult decisions to restore the public finances,” said the chancellor. “Would I have preferred not to have had to do that? I would have done.

“But I do believe they are the right and responsible decisions for the long-term economic security of this country and we’ve done it in a fair way.

“Going forward, my priority is to cut tax and put money back in people’s pockets. You saw that in the autumn Budget. I was very clear about that. And the direction of travel over the rest of the parliament is that.”

Ms Reeves said government waste and inefficiency had left a “black hole” in the state finances, pointing to the purchase of personal protective equipment (PPE) during the pandemic, some £8.7bn-worth of which had to be written off as unusable.

“You can't help wondering whether this tax rise is to pay for a black hole because of this government’s waste and mismanagement,” said Ms Reeves.

Mr Lewis said it was “untenable” to expect ordinary people to ride out the coming wave of price rises by cutting back on treats or tightening their belts.

“As the Money Saving Expert who’s been known for this, I am virtually out of tools to help people now,” he told Sunday Morning.

“It’s not something money management can fix. It’s not something for those on the lowest incomes telling them to (tighten) their belts will work. We need political intervention.”

He asked: “Do we want to be a country - and I say it without hyperbole - where we’re going to have those on the lowest incomes in this country genuinely choosing between whether they starve or whether they freeze?”

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