Rishi Sunak has attributed the record rise of energy prices to China pushing up global prices and Britain’s “colder than usual winter”.
In the wake of the Government’s £9 billion package announcement to try and ease cost-of-living expenses, the Chancellor said the financial squeeze on households in the months ahead could not be underestimated.
Writing in The Sun, Mr Sunak said that the factors causing the dramatic rise to energy prices were out of the Government’s control.
He wrote: “One (factor) is the steep rise in demand for gas in places such as China, which has pushed up global prices.
“Another is 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.
“There are no two ways about it: (the £693 annual increase per household on average) … is a big hit for people to take and I don’t underestimate it one bit.”
The Chancellor continued: “We made a difficult decision last year that in order to tackle the unacceptable backlogs caused by the pandemic, as well as to pay for vaccines and integrate our health and social care system, we would have to raise the money to do so.
“We can’t borrow for wholesale reform and we were upfront about that from the beginning.”
The Government’s newly-announced Energy Bill Rebate was rolled out earlier on Thursday to try and “cushion the blow” of rising energy costs – which will be coupled with a 7.25% increase in inflation in April.
The £9 billion package will provide each family with £350 which will include a one-off repayable £200 discount and a £150 rebate on council tax bills.
Mr Sunak explained: “Four out of five families will get £150 in April as a discount to their council tax bills — so cash is there in your bank account straight away to help with the rise in cost.
“Then, in the autumn, everyone will get £200 off their energy bills that will be repayable over the course of five years.
“We have done it in this way to ensure that help is targeted at those who need it most, while also providing some support for those in the squeezed middle — the local schoolteacher, hospital nurse or police officer — who will be feeling the pinch too.”
Following the announcement on Thursday, the Prime Minister defended the measures as a “mega package”, adding: “I don’t think we have seen anything like it in recent memory.”
Speaking to 5 News, he said: “We know the cause, it’s been driven by inflation in energy costs around the world, particularly the gas price spike that we are seeing. We have got to help people, I think that Rishi’s package is extremely good.”
He did not directly answer a question, also raised in Parliament, about a windfall tax on fuel companies like Shell, which have profited from the spike in global prices.
He said the world is experiencing a “bumpy period post-Covid” with “inflation, blockages in supply chains as the global economy recovers”.
He added: “I think when it comes to taking huge sums of taxpayers’ money, £9.1 billion, transferring it to help people with the cost of their heating and their energy, everybody can see that that’s a massive commitment.”
Ofgem, the energy regulator, has said prices are set to soar by 54% for 22 million households from the beginning of April, adding £693 to the annual costs of a typical household.
The Chancellor also rejected calls for a windfall tax on energy companies making profits while customers struggle to pay rising bills.
The Chancellor told The Martin Lewis Money Show such a levy would “deter investment” in the North Sea, which he said was needed to boost the economy and employment levels.
In a move it hopes will take some pressure off households, bank rate setters hiked the base interest rate from 0.25% to 0.5%.
But the Chancellor said there could be a further price hike later in the year due to an “unpredictable” energy market.
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