Johnson admits £ 15bn cost-of-living measures “big bazooka” won’t “fix everything for everyone”
Boris Johnson described the measures announced by Rishi Sunak yesterday as a “big bazooka”, but admitted that he would not “fix everything for everyone”.
In a clustered clip for Sky News, he says:
I will not pretend that this will fix everything for everyone immediately. There will still be pressure.
But it is a very, very substantial commitment from the government to get us through what I fear will still be a difficult time with rising energy prices around the world.
Johnson adds that the £ 15bn package “will get us through” until energy prices start to fall, when the UK is in a “much, much” stronger position.
The reason we are in a strong position is because we have a lot of people working, which gives us the tax base we need to take care of the rest.
Q: Are you worried that spending £ 10 billion more than what you will collect on the extra tax can be inflationary?
Johnson says the answer is no. He believes the £ 400 discount will not necessarily lead to more discretionary spending because people’s spending will increase, and have already increased, due to higher energy and food costs.
It is designed to meet the needs of the people right now.
[However, the CEBR predicted this morning that wealthier households could spend the rebate, leading to higher inflation]
Johnson notes that unemployment has been the lowest since 1974, which he says people would not have expected when the Covid-19 blockades began.
The UK is using its fiscal firepower to outperform Covid’s economic aftershocks, such as higher energy costs, and it will come out “much stronger” on the other side, he says.
Closing summary
It’s time to dump her and move on.
Boris Johnson has admitted that the latest cost-of-living package from the government will not fully protect people from rising prices.
Speaking a day after Rishi Sunak revealed 15 billion pounds of support in response to the energy crisis, the prime minister said:
I will not pretend that this will fix everything for everyone immediately. There will still be pressure.
But it is a very, very substantial commitment from the government to get us through what I fear will still be a difficult time with rising energy prices around the world.
Johnson also advocated giving all households a £ 400 energy discount, regardless of their circumstances, saying it was “massively, massively redistributive”.
In an interview with Bloomberg, Johnson had an optimistic view that the UK was not necessarily heading for recession.
But Johnson declined the opportunity to pledge to pay £ 400 to a charity, as did Chancellor Rishi Sunak, because he lives in a government flat.
Sunak said people who did not need the discount should donate the money to charity, as he would, insisting that a universal payment was the best way to ensure that those who needed it were protected.
He told Sky:
“You, like me, can also donate this money to a charity if you don’t need it.
Labor criticized the government for allowing second home owners to get two £ 400 discounts, saying this showed the plan had been launched to distract Sue Gray’s report from Partygate.
Sunak also argued that his plan would not have much of an impact on inflation, already at a 40-year high of 9%, and insisted he was still a “fiscal conservative” despite announcing plans that would require an additional £ 10bn loan. .
The Institute for Tax Studies said Sunak was “participating in a serious redistribution from rich to poor”:
The poorest households will now be roughly offset by the rising cost of living. Many low-income people will be better off this year than they were last year. Those earning high incomes will tend to be worse off.
But the Resolution Foundation noted that giving a flat-rate energy discount meant that wealthy pensioners were the big winners, while families with several children could feel “hard justice” as their increased use of energy.
The CEBR warned that more aid will be needed next year if energy prices, driven by the Ukrainian war, do not fall.
Deutsche Bank said the package would only have a modest boost to growth, but probably enough to stave off the recession.
The bad news for borrowers, however, is that it could spur the Bank of England to raise interest rates faster, Capital Economics warned.
Shares of oil producers fell as the City Council digested the unexpected tax, while electricity producers weakened after Sunak hinted that they would also face a tax.
Shell criticized Rishi Sunak’s extraordinary tax, saying it was a threat to investment in North Sea oil and gas as Britain tries to increase its national energy supply.
Our Politics Live blog has the latest action, including the resignation of Conservative MP Paul Holmes as Parliamentary Private Secretary in response to revelations in the Sue Gray report.
Shell: Extraordinary tax is a threat to investment
Alex Lawson
Shell has said Rishi Sunak’s unexpected tax is a threat to North Sea oil and gas investment as Britain tries to increase its domestic energy supply.
A Shell spokesman said:
We understand the concern of millions of people about how high energy costs are challenging their home budgets, and the need for support to help reach the end of the month.
But at the same time, we need to keep investing to ensure the supply of oil and gas that the UK needs today, while allocating future spending on the low-carbon energy we want to build for the future.
However, in its current form, the rate creates uncertainty about the investment climate for North Sea oil and gas for the coming years.
And, in the longer term, the proposed tax breaks for investment do not extend to the renewable energy system that we want to promote in the UK and in which we invest very substantially. When we make plans for the next decade and beyond, we need certainty.
Shell has been studying the new oil and gas tax a bit more … and he’s not happy
The new statement says the rate “creates uncertainty” for investment in the North Sea and does not encourage its renewable energy investment plans … pic.twitter.com/Bz8aQ0LyKm
– Emily Gosden (@emilygosden) May 27, 2022
Shell plans to invest £ 20 billion to £ 25 billion in the UK over the next decade, mainly in renewable energy projects.
Industry experts were surprised that the spot rate will remain in place until “normal” energy market conditions return or until the end of December 2025.
Updated at 15.28 BST
Full story: Boris Johnson says the UK is “not necessarily” heading for recession
Boris Johnson has said the UK is “not necessarily” heading for a recession after its chancellor announced a £ 15bn package to help people cope with rising energy bills and inflation .
While experts warn of future problems for the economy and the government introduces emergency measures to help troubled households, the Prime Minister made an optimistic note on the UK’s financial outlook in an interview with Bloomberg TV.
“There are ways forward for the UK that are incredibly exciting,” he said.
“If we make sure we have a proactive approach to foreign talent, we want to control immigration but allow the talent we need to come in, fix our energy supply problems, fix the problems in the UK job market.
The government’s £ 15bn cost-of-living package could encourage the Bank of England to raise interest rates faster, says Paul Dales of Capital Economics.
The Bank could even vote for a larger-than-usual increase of 1% to 1.5%, instead of a typical quarter-point move. This would increase the pressure on borrowers
Dales explains:
The new fiscal stimulus announced by the chancellor this week puts more pressure on the Bank of England to raise interest rates in restrictive territory.
As a result of this and other recent events, we are increasingly confident that interest rates will rise from 1.00% now to 3.00% next year.
Also, although we are forecasting a 25 basis point rate hike at the next Bank policy meeting on June 16, we believe that a 50 basis point hike is slightly more likely than the possibility of a 10 basis point and 20% market prices.
Boris Johnson avoids talking about Rishi Sunak’s comment that he will give his £ 400 to a charity.
Instead, the Prime Minister says the support package will not fully cover household costs, but will help people a lot.https: //t.co/FXTNEgrI7D.
📺 Sky 501 and YouTube pic.twitter.com/uYI2MiSxEt
– Sky News (@SkyNews) May 27, 2022
Johnson does not say whether he will donate £ 400 to charity
Q: The Chancellor is giving his £ 400 discount on energy tax to a charity, will you do the same?
Boris Johnson says his arrangements are different, as he lives in a government flat.
It is important for people to recognize that these payments will not necessarily fully cover the cost increase, the Prime Minister added:
We cannot cover all the costs that people will face, we must be realistic about it.
However, they will go a long way in helping people.
Updated at 14.20 BST
Q: How will long-term timely payments help families?
Johnson agrees the package is temporary, saying the “natural force” of the economy should drive it, but the government is helping people cope now with rising energy prices.
Q: Some families do not need this help and some will receive the discount more than once (because they have multiple homes). Will this not benefit people who are already rich, at the expense of the taxpayer?
Johnson insists the package is “massively, massively redistributive” and “what needs to be done,” citing analysis by the Institute for Fiscal Studies (see 9:28 p.m.) and the Resolution Foundation (see 11:20 p.m.).
Boris Johnson is also being asked what the difference is between the Labor Party and the Conservative Party in terms of taxes and spending, after yesterday’s announcement.
Johnson says that …