Economy Update

I know the whole House will agree that we have a responsibility to help those who, through no fault of their own, are paying the highest price for the inflation we face. To help with the cost of living, we are going to provide significant targeted support to millions of the most vulnerable people in our society: those on the lowest incomes, pensioners and disabled people.

First, on people on the lowest incomes, over 8 million households already have incomes low enough for the state to be supporting their cost of living through the welfare system. They could be temporarily unemployed and looking for work; they could be unable to work because of long-term sickness or disability; or they could be on low pay and using benefits to top up their wages. Right now, they face incredibly difficult choices. I can announce today that we will send directly to around 8 million of the lowest-income households a one-off cost of living payment of £650. That support is worth over £5 billion and will give vulnerable people certainty that we are standing by them at this challenging time. The Department for Work and Pensions will make the payment in two lump sums, the first from July and the second in the autumn, with payments from Her Majesty’s Revenue and Customs for those on tax credits following shortly after. There is no need for people to fill out complicated forms or bureaucracy, as we will send the payments straight to their bank account.

Our policy will benefit over 8 million households in receipt of means-tested benefits from July. Uprating in that timeframe could only be done for those on universal credit, and our policy will provide a larger average payment this year of £650, whereas uprating the same benefits by 9% would be worth only £530 on average.

There are two further groups who will need extra targeted support. Many pensioners are disproportionately impacted by higher energy costs. They cannot always increase their income through work and, because they spend more time at home and are more vulnerable, they often need to keep the heating on for longer. We estimate that many people who are eligible for pension credit are not currently claiming it, which means many vulnerable pensioners will not be receiving means-tested benefits. I can announce today that, from the autumn, we will send over 8 million pensioner households that receive the winter fuel payment an extra one-off pensioner cost of living payment of £300.

Disabled people also face extra costs in their day-to-day lives; for example, they may have energy-intensive equipment around their home or workplace. To help the 6 million people who receive non-means-tested disability benefits, we will send them, from September, an extra one-off disability cost of living payment worth £150. Many disabled people will also receive the payment of £650 I have already announced, taking their total cost of living payment to £800.

I can reassure the House that next year, subject to the review by the Secretary of State for Work and Pensions, benefits will be uprated by this September’s consumer prices index, which on the current forecast is likely to be significantly higher than the forecast inflation rate for next year. Similarly, the triple lock will apply to the state pension.

Of course we recognise the risk that, with any policy, there may be small numbers of people who fall between the cracks. For example, it is not possible right now for the DWP or HMRC to identify people on housing benefit who are not also claiming other benefits. To support them and others, we will extend the household support fund delivered by local authorities by £0.5 billion from October.

This is a significant set of interventions to support the most vulnerable in our country. We will legislate to deliver this support on the same terms in every part of the United Kingdom, including Northern Ireland. Taken together, our direct cash payments will help one third of all UK households with cost of living support worth £9 billion.

We are meeting our responsibility to provide the most help to those on the lowest incomes. I believe that is fair, and I am confident that the House will agree, but many other families who do not require state support in normal times are also facing challenging times. Is it fair to leave them unsupported? The answer must surely be no.

Although it is impossible for the Government to solve every problem, we can and will ease the burden as we help the entire country through the worst of this crisis. We will provide more support with the rising cost of energy, and that support will be universal. Earlier this year, we announced £9 billion to help with the cost of energy, including a council tax rebate of £150 for tens of millions of households.

We planned to provide all households with £200 off their energy bills from October, with the cost repaid over the following five years. Since then, the outlook for energy prices has changed. I have heard people’s concerns about the impact of these repayments on future bills, so I have decided that the repayments will be cancelled. For the avoidance of doubt, this support is now unambiguously a grant. Furthermore, we have decided that the £200 of support for household energy bills will be doubled to £400 for everyone. We are on the side of hard-working families with £6 billion of financial support.

To summarise, our strategy is to combat and reduce inflation over time through independent monetary policy, fiscal responsibility and supply-side activism. We are raising emergency funds to help millions of the most vulnerable families who are struggling right now, and all households will benefit from £400 of universal support for energy bills, with not a penny to repay.

In total, the measures I have announced today provide support worth £15 billion. Combined with the plans we have already announced, we are supporting families with the cost of living through £37 billion or 1.5% of GDP. That is more than or similar to the support in countries such as France, Germany, Japan and Italy. I am proud to say that around three quarters of that total support will go to vulnerable households.

As a result of the measures announced today and the action we have already taken this year, the vast majority of households will receive £550, pensioners will receive £850 and almost all of the 8 million most vulnerable households in the country will, in total, receive support of £1,200.

Let me put that in context. The House will have noted the news from Ofgem earlier this week that it expects the energy price cap to rise to £2,800 in October. That implies an average increase in people’s bills this year of just under £1,200, which is the same amount as our policies will provide for the most vulnerable people this year.

I know there are other pressures. I am not trying to claim that we have solved the entire problem for everyone—no Government could—but I hope that when people hear of the significant steps we are taking, and the millions we are helping, they will feel some of the burden eased and some of the pressures lifted. They will know that this Government are standing by them.

Supporting people with the cost of living is only one part of our plan for a stronger economy—a plan that is: creating more jobs; cutting taxes on working people; reducing our borrowing and debt; driving businesses to invest and innovate more; unleashing a skills revolution; seizing the benefits of Brexit; and levelling-up growth in all parts of the United Kingdom. The British people can trust this Government because we have a plan for a stronger economy, and I commend it to this House.

Every day for five months, the Prime Minister sent Conservative MPs out to attack the windfall tax and yet defend an increase in taxes on working people. He has made them vote against the windfall tax not once, not twice, but three times. For months, he has sent his MPs to defend the litany of rule-breaking in No. 10 Downing Street that was set out in the Sue Gray report yesterday. There is a lesson here for Conservative MPs: you cannot believe a word this Prime Minister says, and as long as he is in office, he will continue making fools out of each and every one of you. If they keep him there, that is their choice. The problem is that you cannot fake fairness—you either believe in it or you don’t.

Labour called for a windfall tax because it is the right thing to do. The Conservatives are bringing it in because they needed a new headline. We see that, too, from all the other things that the Chancellor did not address today: the non-doms keeping their tax privileges while the Government increase taxes on working people; young working people paying more, but those who earn money buying and selling stocks and shares not paying a penny more; contracts handed out to Conservative friends and donors while British businesses miss out; global tech giants making billions in profits while smaller businesses and the energy-intensive industries struggle with higher bills and higher taxes from the Conservative party; and £11.8 billion lost in fraud because of a total lack of respect for taxpayers’ money. That is why we should have had an emergency Budget today that spikes the hike in national insurance, cuts business rates for high-street and small businesses, provides help for energy-intensive firms and ensures that every pound of taxpayers’ money is spent wisely.

We will look closely at the detail of today’s announcements. Of course, most of them seem to be written by us, but so far we have seen nothing to suggest that this Conservative Government have the ideas or the energy to tackle the challenges we face as a country. A Labour Government would have addressed the underlying weaknesses in our economy, so that we can stop this spiral of inflation, lift wages and provide greater security for families and for our country. The truth is that the Conservatives are running our economy, and people’s living standards, into the ground. We are forecast to have the slowest growth and the highest inflation in the G7. This Government have weakened the foundations of our economy, leaving us exposed to shocks as we lurch from crisis to crisis, and still they refuse to come forward with a real plan to fix our broken system and provide the security we need to face the future with confidence. That means boosting our energy security too. We need to do much more to reduce our reliance on imported oil and gas. That is why Labour’s energy security plan includes a programme of home insulation, to reduce bills not just for one year, but for years to come and to get us all the way to net zero. It is why we have urged the Government to double onshore wind capacity and to end the delay on nuclear power. [Interruption.] And while we are at it, why did this Tory Government get rid of our gas storage—[Interruption.]

The hon. Lady also asked about VAT. This goes to the heart of the issue. VAT is worth, on average, about £140 of support; our policy, universally—to all households in this country—is worth £400. That is the reason not to do VAT. What we are doing is far more generous.

My final point—I know we are pressed for time, Madam Deputy Speaker—is about ideas. For our constituents, there are only good ideas and bad ideas, and whether we can do anything about them. This Government can, because we are always on the side of the British people. This Government have been faced with challenges unlike any other and at every step we have achieved things that the Labour party said were not possible. We averted the mass unemployment crisis that Labour predicted because of our furlough interventions. We led the country out of covid with a vaccine programme that Labour would have left us unable to deliver. Each time I am at this Dispatch Box opposite the hon. Lady, I find myself thinking the same thing: the public can see through it. They know the difference between a party playing politics and a Government trying to help. [Hon. Members: “Hear, hear!”]

It was pretty cheeky of the Chancellor to choose to include the £150 council tax payment in all the figures he read out. That went only to people who live in homes in bands A to D. It certainly did not go to all pensioners and certainly cannot be included in the money that is going to all pensioners. It cannot be included in the money that is going to all universal credit claimants, and it cannot be included in the money that is going to all disabled people. It cannot be included in the cost of this support package because it is absolutely not universal. On that point, the payment that we made in Scotland went to a higher percentage of households than the payment made in England.

This package does not go far enough. We are going to see an energy price increase of more than £1,000 for all households because of the increase in the energy price cap, yet the Chancellor is providing only £300 extra for pensioners. That will not even touch that £1,000 increase. He is only including these things. The uplift should have been 9%, to match inflation, and there should have been a further £25 uplift to universal credit and a further £25 uplift to legacy benefits. Lastly, he has failed in the uplift for disabled people, who face the very highest cost because of the increase in energy costs and in the cost of, for example, their diets.

I am glad that the Chancellor has put in place the windfall tax. I am very disappointed that it covers only oil and gas companies. It should have gone much wider. We have been calling for this since 2020, with Kate Forbes and Ben Macpherson. [Interruption.] The Labour party failed to support our amendment on this last week, so Labour Members are a bit cheeky as well in suggesting that we have not moved on this.

I would like the Chancellor to go further, to make a difference and to actually care about the poorest people in our society.