Rishi Sunak, honest? He stiffs the poor in a bid to become PM
Most people realise that Boris Johnson can’t help lying, but how about his would-be successors? This week UK Treasurer Rishi Sunak has distanced himself somewhat from Boris Johnson and made a major announcement affecting the pockets of the British public. Here I fact check his article justifying himself.
Energy prices and a fake rebate
In common with many other countries, Britain is faced with inflation in general and an increase in gas prices, so that people are facing a steep rise in their cost of living, made worse by Brexit and the Ukraine situation. In addition, the NHS was struggling even before the pandemic with funding not keeping up with an aging population — a situation Sunak chose to deal with by increasing National Insurance contributions, thereby hitting the poor worst.
Sunak chose to set out his rationale for the decisions he has made, which hit the poor rather than the rich, in the Sun, which is owned by Rupert Murdoch’s News Corp. Australian-born Rupert Murdoch has been called a “Cancer eating the heart of Australian democracy” by former Australian prime minister Kevin Rudd. He moved to Britain and bought papers there, then moved to America and took American citizenship so he could expand his media empire there. He has retained his British ties, having meetings with Boris Johnson and Rishi Sunak and returning to get a COVID vaccine as his Fox ‘News’ channel promoted anti-vaccine positions while requiring staff to be vaccinated.
He blames the increase in gas prices on increased demand in China, which is true, and on “the fact that we have had a colder than usual winter so we have used up more of our own stores of gas here at home”. He links to a story about a single cold night and a forecast of a cold spell. In fact it has been milder in the UK and Europe — though admittedly fears of a cold winter pushed prices up.
Because in the UK prices to the consumer are capped by Ofgem, the Office of Gas and Electricity Markets, retail suppliers were unable to pass on the increased prices and several went bust. However on Thursday Ofgem announced an increase in the price cap of 54% from April.
Sunak said on average, people will be seeing their energy bills rise by £693. That is true for people paying by direct debit, but in fact people paying by other methods will have a higher cap. This will particularly hit the very poor who are more likely to pay by prepayment meter. And how would they get the ‘rebate’?
Sunak says he will provide families with £350, which will cover more than half the cost of the rise. He announced it as a rebate or discount, but in fact £200 of it is a loan which will reduce their autumn energy bill, but which will be deducted from subsequent bills at the rate of £40 per year for 5 years. It remains to be seen if enforcing a loan on people is even legal. And if somebody leaves a household that receives the £200 and moves to their own pad, they will have $40 a year deducted from their bills.
The remaining $150 would be a discount on their council tax bills for those whose properties are assessed in the lower bands. This may help four out of five households as he says, but won’t help poor people living in expensive areas. It’s not clear how councils will find the money for this.
This is going to make life a lot harder for the poor.
In contrast, Norway plans to subsidise home energy bills.
Like Boris Johnson, Sunak could not resist a dig at Labour, accusing them of announcing “unfunded packages worth tens of billions of pounds of your money without being honest about how it will be paid for or the impact it will have on our public finances”, but it seems as if this package will be paid for by customers and councils.
NHS and National Insurance contributions
Mr. Sunak also plans to raise National Insurance contributions to pay for the pandemic-induced NHS backlog and vaccines. As a result, people earning over £100,000 a year could pay proportionately less than those on £30,000 to £50,000 — hardly as fair as he claims to be. The government is being urged to scrap the increase, but are adamant that they will not.
Economic recovery?
Sunak wrote, “But I can help absorb the shock for people in the short term, while remaining on course to get our borrowing and debt down. We have always been the party of sound money — we will always continue to be on my watch — and that is the only kind of party I am interested in.” See the dig at the prime minister there? Conservatives, initially in coalition with the Lib-Dems, have been in power since 2010. While the increase in the U.K. Debt to GDP Ratio began under Gordon Brown, conservatives had done nothing to bring it down by the time the pandemic began. It is eighth highest in Europe.
He went on to say, “Our economic recovery has been one of the strongest in Europe”. Whether this is true or not depends on what baseline you use. Both the UK and European economies have returned to pre-pandemic levels, so not much difference there. If you look at the past year, UK has been fastest of the G7, as Boris Johnson has claimed, but if you look at Q2 to Q3 2021, for example, the UK was fifth out of seven.
Vote for me
His final sentence reads very much like a job application: “I’m not afraid to make the tough but right decisions to ensure I — and future Chancellors after me — can respond in emergency situations and in the best interests of the country”. Really?
The reality he missed
Sunak also spoke to the House of Commons on Thursday. He said, “It is not sustainable to keep holding the price of energy artificially low”, and “For me to stand here and pretend we don’t have to adjust to paying higher prices would be wrong and dishonest”. What he failed to address was:
- The spike in gas prices caused by a fear of a harsh winter has already subsided — what can he do to make sure that prices to consumers fall accordingly?
- Fossil fuel companies aren’t exactly hurting — for example Shell just announced a 14-fold rise in profits. He has refused to impose a windfall tax, saying it would deter investment, although it would be much fairer to tax the rich who have profited rather than poor consumers, a reduction in fossil fuel investment would be better for the environment, and we gain little benefit from such investment.
- The UK exports a lot of its own gas, and the profits too, making us vulnerable to fluctuations in foreign demand and prices. This means that increasing our own production wouldn’t make much difference.
- Rising fuel prices will lead to an increase in tax revenue — £3.1bn according to House of Commons library research. And if the economy is as good as he claims, this should not be offset by revenue losses elsewhere. He hasn’t cut VAT on energy, as some have called for.
- France has imposed an energy cap on EDF, so he could cap prices too. If other countries impose caps and we don’t, then energy producers that operate in both markets will recoup their profits in the UK.
- EDF, a French nuclear firm, has warned that its electricity generation would be cut, so more gas would be needed.
- We are particularly vulnerable to temporary spikes in gas prices as we have little storage capacity, as nothing was done to replace a huge gas storage facility that closed.
- Russia is the largest single supplier of gas in western Europe, not that we buy much from them, but the Ukraine situation could lead to greater shortages and higher spikes. What would he do if this happened? Another ‘rebate’? His ‘rebate’ idea is not sustainable.
- There’s no mention of help for small businesses, particularly those in manufacturing.
- Brexit was supposed to reduce energy bills. This could have been done in two ways — cut VAT on energy, or reduce our vulnerability to world energy prices. Nothing seems to have been done about either.
In trying to paint his ‘rebate’ as helping the British public while doing nothing to rein in the greed of fossil fuel companies goes beyond putting lipstick on a pig. It is downright dishonest, and hard working Brits deserve better. He doesn’t get my vote.