Rishi Sunak warned by senior conservatives not to allow ‘Treasury orthodoxy’ to stifle critical funding this winter, with conservatives demanding action in budget on energy bills, criminal justice and support to poorly paid people.
As the Chancellor prepares to unveil his budget and spending review this week, he is still in a rush to include measures that would limit the impact of rising energy bills and the £ 20-a-week cut universal credit.
Sunak is set to announce a significant increase in the national living wage and is also considering additional help for those struggling with energy bills as a result of the price hikes. Its package will include £ 3 billion for post-16 education and adult learning. It will cover skills training camps, £ 1.6 billion for teens to study T levels and 24,000 internships.
However, MPs from all parties fear the Treasury is taking too strict a line on spending, which could undermine Boris Johnson’s promise to ‘level’ the country.
With Labor on Sunday calling for the removal of VAT on heating bills this winter, Robert Halfon, Conservative chairman of the education select committee, said the move would help people get through winter and fulfill a promise to Brexit campaign to cut taxes on energy bills.
“It’s a simple way to try and ease the pain of ever-rising energy bills for hard-pressed workers,” he said. “It’s a relatively small measure and it will help people at a difficult time. “
Labor said a six-month suspension of VAT on national energy bills, currently set at 5%, would cost around £ 1 billion and could be funded by higher-than-expected VAT revenues this year . However, Whitehall sources have warned that such a blanket move would lower the bills for the wealthy. The Chancellor could prefer a more targeted device, such as an extension of the discount of hot housing intended for low wages.
Sunak also faces an attempt by his peers this week to force a vote in the House of Commons on his decision to cut universal credit payments by £ 20 per week.
Sir Iain Duncan Smith, the former Tory leader who is pushing for Sunak to mitigate the impact of the cut, said: “We are not in the same situation as in 2010. We should not see ourselves as in a Orthodoxy of the Treasury., that is, we must somehow recover [spending] right now. It looks more like a war debt. Universal credit is about people’s lives. If you help them support them, they will reimburse you.
The calls come amid growing warnings of a cost of living crisis. A typical family with two children would be almost £ 500 worse off next year due to changes to national insurance and an expected 5% increase, according to new analysis by think tank IPPR of the housing tax.
A TUC report also shows that wages are not rising fast enough to offset rising taxes and inflation. With wages rising from 3.5% to 4% annually and inflation heading towards 5% in the new year, Bank of England chief economist’s latest assessment says wages will start to decline in real terms even before the tax hikes go into effect in April.
TUC boss Frances O’Grady said union reports with members of the manufacturing and transport industry showed that outside of a few sectors suffering from severe labor shortages, increases in labor wages remained moderate.
A leading think tank and more than 70 academic economists are also using an open letter to urge Sunak to squeeze at least £ 70bn of a fiscal stimulus into his budget and spend to help stabilize rather than quash. ” to reduce expenses. The signatories include Simon Wren-Lewis, Professor Emeritus of Economics at the University of Oxford, Professor Ha-Joon Chang of the University of Cambridge and Diane Perrons, Professor Emeritus at the London School of Economics.
The Tories are also concerned that the budget for criminal courts could be hit again, just as the National Audit Office has warned that a backlog of cases in England and Wales is expected to persist for several years.
Robert Buckland, who was Justice Secretary until last month, told the Observer the reputation of the justice system was at stake.
“We have made good progress in recent years by increasing the budgets of the Ministry of Justice, but it is important that this is supported,” he said. “For much less than money spent on health, much can be done to restore the reputation of righteousness.”
Lord Mackay, who served as Lord Chancellor for a decade, said he was increasingly concerned about the state of the justice system due to spending cuts. “I am very convinced that it is extremely dangerous for us as a nation if criminal work is delayed,” he said. “If anything is done to make the situation worse, it would be a more serious violation of our responsibility to our people, including the responsibility we have under the Human Rights Act. “
A spokesperson for the Treasury said there was already an energy price cap for bills and a £ 500million household support fund to help those in most difficulties. “The budget and expenditure review will indicate how we will continue to invest in public services, businesses and jobs while maintaining public finances on a sustainable basis,” they said.