Rishi Sunak – 2022 Speech on the Cost of Living Crisis

The speech made by Rishi Sunak, the Chancellor of the Exchequer, in the House of Commons on 17 May 2022.

I am proud to speak today in support of a Queen’s Speech that will both ease the cost of living with billions of pounds of support for families and grow the economy, creating more jobs, more investment and higher wages.

The International Monetary Fund, the OECD and the World Bank have all warned that high inflation is the most acute challenge facing not just the UK, but the global economy. We are not alone in facing these challenges: covid has disrupted supply chains; Putin’s invasion of Ukraine has exacerbated the shock in energy prices; and businesses are facing shortages. The causes are indeed global, but, of course, the consequences are being felt here at home. Families up and down the country are being hit hard by the rise in prices of fuel, of food and of heating. I cannot say to people that this will be easy; the next few months will be difficult. There is no measure any Government can take and no law we can pass that can make these global forces disappear overnight. No honest Chancellor could stand here and promise that prices will not rise further, or that the Government can cover every extra pound on people’s bills.

Several hon. Members rose—

Rishi Sunak

I will give way in a second.

To suggest that no help is available, as some have said today, is both misleading and irresponsible.

Stephen Timms (East Ham) (Lab)

The other day, the Chancellor said that he could not increase benefits because of IT problems. At the start of the pandemic, quite rightly, he increased universal credit by £20 a week. Will he do that again?

Rishi Sunak

Given the right hon. Gentleman’s experience, he will know, perhaps better than me, that there are multiple different benefits on multiple different systems, and while universal credit does have the flexibility of being changed at different times—a policy, by the way, that the Labour party opposed at every step of the way—the remainder of benefits and pensions cannot be uprated mid-year. I am sure that my right hon. Friend the Secretary of State for Work and Pensions will speak to that later.

The Secretary of State for Work and Pensions (Dr Thérèse Coffey) indicated assent.

Rishi Sunak

None the less, I am glad to see that the right hon. Gentleman supports universal credit. That is one thing that the Government are proud of introducing. The benefit can respond in a crisis, as it so admirably did.

John Cryer (Leyton and Wanstead) (Lab)

The Chancellor has just admitted that he could increase universal credit by £20, so why does he not do it?

Rishi Sunak

Because we want to make sure that we get support to everyone in a way that suits them. What we did do—and we heard this from the right hon. Member for Doncaster North (Edward Miliband) when he gave a case study on universal credit—is cut the universal credit taper by the biggest amount ever. That was the biggest tax cut that we have seen for people on low incomes, which is in contrast to the cherrypicked example that we heard from right hon. Gentleman. What does that mean for a single mother on universal credit, working on the national living wage, renting, and with two children? It means that that mum will be £1,600 a year better off this year. That is what this Government are doing. Help is there, and anyone seeking to pretend otherwise is simply causing more worry and more anxiety.

Robert Halfon (Harlow) (Con)

There is no recognition from Labour Members of the £22 billion that the Government put in to help with the cost of living, particularly the 5p cut in fuel duty. However, I do have one ask of my right hon. Friend. The oil companies are not passing the cuts to the pumps. They take ages to reduce the prices when the international oil price falls, but oil bosses are earning multi-million pound salaries and getting multi-million pound bonuses. They are, in essence, the new oligarchs. I urge him to consider both a windfall tax on the oil companies, which we can then use to cut taxes for the lower paid or to cut energy bills, and a pump-watch monitor to make sure that there is fair competition and that consumers get a fair deal at the pumps. None the less, I genuinely recognise all the work that he has done thus far to cut the cost of living.

Rishi Sunak

I thank my right hon. Friend for his advice and support, and I will come on to both of his points momentarily. He is right to remind the House that so far we have provided £22 billion of direct support. That is not a trivial figure; it is £22 billion of support to help families up and down our country at a time of challenge. We have taken action, as we heard, to cut people’s bills, starting with fuel duty—I commend him for his campaigns on that. It has been cut by 5p a litre, which is worth £100 this year together with the freeze, and council tax, cut by £150.

What the right hon. Member for Doncaster North did not mention was that that £150 of support, which, as we heard from my right hon. Friend the Member for Harlow (Robert Halfon), has made a huge difference to families, came faster than any support the Labour party was offering in its proposal, and it went to a far broader group of people than their proposal, because we wanted to support those on middle incomes as well.

Edward Miliband

VAT!

Rishi Sunak

VAT would have been worth about, I think, £8 a month at the time. This is £150 in people’s bank accounts in April.

We also cut the taper rate on universal credit, giving an extra £1,000 to the average household. The warm home discount increased to £150, the national living wage increased, giving low-paid workers a pay rise of £1,000, and we will go further.

David Linden (Glasgow East) (SNP)

I want to take the Chancellor back to what he said earlier in his speech about the Government’s acting quickly on the covid crisis. Does he recognise that many of our constituents are in a crisis now? I know he is installing a new swimming pool in the house he lives in, but I can tell him that people in Glasgow East are struggling and his Government need to do more.

Rishi Sunak

This Government have always acted to protect this country at times of challenge; we have done so through the past two years and we continue to do so now. As has been said, £9 billion of support on energy bills was announced in February at the same time as the price cap was increased, and it covered 50% of the rise in bills—accepting and being honest with the House, as we discussed at the time, that no Government could cover every pound of an increase when we are in a situation with global inflationary forces, and that it would be both irresponsible and misleading to pretend to the British people that that was possible.

But we are going further: in October, a further discount on energy bills worth £200 and, in just a few weeks’ time, a massive tax cut for workers when the national insurance threshold is increased to £12,500. That is a £6 billion tax cut for working people, the biggest increase in a personal tax threshold ever, and it will mean that everyone in this country can earn £12,500 without paying a penny of income tax or national insurance. That means, in contrast with what we have heard, that 70% of working people will pay less tax this year than they did last year.

Taken together, all the measures I have just mentioned equate to a £22 billion plan to help cut costs for families and help people with the cost of living. Of course, as the situation evolves, our response will also evolve. I have always been clear that we stand ready to do more.

That brings me to the topic of a windfall tax. Unlike the Labour party, we Conservatives do not believe that windfall taxes are the simple and easy answer to every problem. However, we are pragmatic, and we want to see our energy companies, which have made extraordinary profits at a time of acutely elevated prices, investing those profits back into British jobs, growth and energy security. I have made it clear and said repeatedly that, if that does not happen soon and at significant scale, no option is off the table.

Global economic forces are indeed hitting the British people hard, and that is why the Government are stepping in to help. Ultimately, however, over the long term we on the Conservative side know that the best way to raise living standards is to grow the economy. That is why our economic plan and this Queen’s Speech will create more jobs, more investment and, crucially, higher wages.

During the pandemic, we provided billions in support not only to the economy, but specifically to businesses. Because of schemes such as furlough we were able to keep millions and millions of people in work, and the success of our plan for jobs is clear. As we heard from my right hon. Friend the Member for Forest of Dean (Mr Harper), unemployment right now is the lowest it has been in almost half a century, job vacancies are the highest they have ever been, and total pay is rising in real terms and is more than 4% higher than before the pandemic, even adjusted for the inflation we are seeing.

That does not happen by accident. It is the result of a responsible Conservative Government delivering a stronger economy—an economy that grew faster last year than any of our competitors. That strong recovery is making a difference to people’s finances. Taken together, the combination of policy measures the Government have announced and the growth in the economy offset around half the shock to incomes caused by higher global energy and goods prices. Half of that shock has been offset by the result of our actions to grow the economy and support people directly.

Of course we need to do more to create further economic growth. That is why this Queen’s Speech includes measures to do exactly that.

Dame Angela Eagle (Wallasey) (Lab)

Given that the right hon. Gentleman was just talking about growth in the economy, he will be aware that the Governor of the Bank of England and the Monetary Policy Committee told the Treasury Committee yesterday that growth would be negative in the fourth quarter of this year. Growth is slowing, unemployment is rising and inflation is soaring—is that not correct?

Rishi Sunak

I think the hon. Lady said unemployment is rising. No—it just fell this morning to the lowest level in almost half a century. I will come on to our growth figures in just a second, but we have had a strong recovery and are forecast to continue growing strongly relative to peers.

We do need to do more, and that is why the Queen’s Speech includes measures to boost our national infrastructure, to level up, to back financial services—one of our biggest and most successful sectors, employing millions of people across the country—to cut red tape, to use our new Brexit freedoms, to back British businesses, to reform higher education and to strengthen our energy security. We on the Conservative side know that over the longer term, the best way to create growth is to have an economy where businesses can invest more, train more and innovate more.

Dan Carden (Liverpool, Walton) (Lab)

While the Chancellor is still considering a windfall tax, I want to tell him about one constituent of mine who got in touch: a 62-year-old woman in Walton, who decided to disconnect from British Gas for fear of a bill coming through her door in a few months’ time.

Rishi Sunak

I am very sorry to hear about the circumstances of the individual concerned. I would be happy to talk to her directly, if that would help, but I hope the hon. Gentleman, in his role, can explain to her the support that is in place to support families such as hers, whether that is direct support with her energy bills, the £150, the fact that her national living wage may well be increased depending on her situation or, as my right hon. Friend the Secretary of State for Work and Pensions reminds me, the fact that she can talk to her local council to access the household support fund that is being doubled to £1 billion to provide direct support to those who are most vulnerable.

Several hon. Members rose—

Rishi Sunak

I am now going to make some progress. Our plan is to build the economy of the future. That is why, this autumn, we will cut taxes on capital, on people and on ideas to drive up growth and support businesses to do so.

While we are talking about growth, we have heard a lot during these debates—I think the right hon. Member for Doncaster North also mentioned it—about the Labour growth that we experienced between 1997 and 2010. It was obviously a very long time ago that we last had a Labour Government, so let me remind the House of the facts.

Under the Labour Government, the UK’s cumulative economic growth was third in the G7. Under this Government, despite having lived through the worst recession in more than 300 years, our cumulative growth is also third in the G7. Let us also remember that when the Opposition last arrived in office, unemployment was 7%. When they left, 13 years later, it was of course higher at 8%. New figures out this morning, as we have heard, show that today, the UK’s unemployment rate is less than half that, at 3.7%, the lowest in almost half a century.

The story is the same on public finances. The deficit in 1997 was 2% of GDP. By 2010, it was nearly 10%, and £1 in every £4 the Government spent was borrowed. There was, as we heard, no money left.

Richard Fuller (North East Bedfordshire) (Con)

May I add to what the Chancellor says that under this Conservative Government we introduced the living wage, which has increased wages for the poorest in our country at a higher rate than the last Labour Government ever had the courage to do, and we now have the lowest unemployment rate for 50 years?

Rishi Sunak

My hon. Friend is absolutely right. This year’s increase in the national living wage is worth £1,000 to someone working full-time who is on the national living wage. That will benefit millions of people, particularly those on a low income. That is our priority and those are our values.

The approach to borrowing that I have described is not the approach of this responsible Conservative Government. Today, despite having spent hundreds of billions throughout the pandemic, we are providing the highest sustained level of public sector investment in decades and investing record amounts in public services such as the NHS. This Government are on track to have borrowing low and debt falling again. That is our record: robust growth, more jobs and being responsible with the country’s finances.

History reminds us that, at times when we face severe supply problems, an unconstrained fiscal stimulus risks making the problem worse, pushing up prices still further and ingraining expectations of higher inflation—a vicious cycle leading inexorably to even higher interest rates and more pain for tens of millions of mortgage holders and small businesses. Let us be in no doubt, simply trying to borrow and spend our way out of this situation is the wrong approach; those paying the highest price would be the poorest in our society. Instead, the Government are taking a careful, deliberate approach. We will act to cut costs for those people without making the situation worse. We will continue to back people who work hard, as we always have, and we will do more to support the most vulnerable—and, unlike others, we will not simply borrow our way out.

So yes, we are helping families by cutting their costs, and it is irresponsible to suggest otherwise. That support will always be part of a broader plan to grow the economy, encourage investment and create more high-skilled, high-wage jobs, all built on the foundation of strong public finances. That is our economic plan. We are providing £22 billion-worth of support to help families with the cost of living. We are creating more jobs, more investment and higher wages. That is what this Queen’s Speech is all about, and I commend it to the House.