Rishi Sunak has confirmed the Treasury will impose a wider windfall tax on electricity generators, that could bring in billions of pounds to help households struggling with soaring food and energy costs.
In Parliament on Monday, the chancellor told the Treasury Select committee that the amount of extra borrowing needed to pay for the £15bn cost of living package will depend on a possible levy on electricity generators, given their extraordinary profits.
The Labour party has accused Rishi Sunak of causing uncertainty and damaging investment plans by threatening to also impose a windfall tax on British electricity generators.
They say the chancellor is damaging the investment environment for new energy projects.
The chancellor admitted that there was no way to ensure that owners of second or third homes do not get extra support from the government on their energy bills.
Labour MP Siobhain McDonagh explained that there are 772,000 households who own two homes — they’ll receive £620m between them.
Another 61,000 people own three homes — and will share a £73m “taxpayer-funded windfall”.
Sunak said: “It’s not possible — that we found a way — to do it, but, as I said, if there’s an alternative that you found please do let us know.
“Having looked at the various delivery options that were in front of us, this is — we think — the most effective way to get support to a very large number of people in a way that would be timely and help them where they need to.”
He also told MPs that consumer price inflation is being caused by firms lifting their prices and that he is not seeing signs of business distress.
Sunak has stressed that his recent package of financial support for households facing soaring inflation is “temporary” as he shrugged off suggestions he has left the door open for further measures.
He told the Treasury Select committee: “When I’m asked about further measures I always give the same response — I wouldn’t read anything more or less into it.
“It is that in the last two years I’ve always tried to be responsive to the economic situation as I see it and as it is affecting the country.
“The structure of what we have put in place is by definition temporary and it is a careful and well-constructed package which will minimise the issue of inflation.”
Sunak also said Treasury officials have not modelled what impact his cost of living support will have on child poverty in the UK.
“I think not expressly,” he said in response to a question from the Treasury Select committee.
“We know that the single-biggest driver of children being in poverty is children growing up in a workless household.
“And the record over the last few years has been very positive to reducing the number of children who are in workless households.
“There are over half-a-million fewer children today in workless households than there were 10 years ago.”
The chancellor told the committee that the timing of the announcement of the support package for households was not linked to the Sue Gray report, which was revealed the previous day.
“We couldn’t do it for the spring statement because the observation window had barely opened for the price cap, so anything could have the potential to be very wrongly sized,” he said.
“Now, we had more of the time you need, in order to have four months of the six-month window behind you to make the decision regarding support on an informed basis.
“I have always said I want to strike the right balance about reassurance to people and waiting for enough information to ensure it is appropriately sized.
“There is no perfect time but we had to do it.”