Rishi Sunak has said cost of living support delivering hundreds of pounds to every household will have a “minimal impact” on inflation – and suggested those who do not need it could give the money to charity.
The chancellor told Sky News that the announcement of new measures worth £15bn to ease the burden on squeezed households was “targeted at those most in need”.
Under the plans, every home will see £400 knocked off their energy bills – an upgrade from a previous policy of loaning them £200 to be repaid over five years – while eight million of the most vulnerable will also receive £650.
Labour said it was wrong that someone owning more than one home could be receiving the government help multiple times.
Mr Sunak’s support package comes at a time when inflation of 9%, a 40-year high, is squeezing households’ spending power, largely thanks to soaring bills for gas and electricity – which are expected to rise by another £800 on average in the autumn.
The universal nature of the energy rebate will have the effect of helping some who do not need any assistance – and Mr Sunak suggested to Sky’s Niall Paterson that “you, like me… can give that money to charity if you don’t need it”.
He added: “Our estimate in my view is that it will have a minimal impact on inflation.”
Asked if it would lift inflation by one percentage point he said “much, much less than that”.
“What we’re doing is very targeted at those most in need. We’re also raising money to help pay for it,” Mr Sunak said.
“The combination of those two things is the responsible approach.
“Even though we are supporting the economy we want to make sure that we don’t make the inflation situation worse.”
Mr Sunak’s support package is partly being paid for by a levy on oil and gas company bumper profits – which have soared due to rising prices – that is expected to raise £5bn over the next year.
The govermment had at first resisted such a proposal, which was being called for by Labour, on the grounds that it would deter investment and it attracted opprobrium from the Tory back benches when it was finally adopted by the chancellor.
Jacob Rees-Mogg, the minister for Brexit opportunities and government efficiency, has told Sky News that there was “not a tax that you can take that is economically cost-free”.
Mr Sunak defended his policy announcement from suggestions that it was not a Conservative measure.
“When we’re dealing as a country with the type of challenge that we now face, with inflation running where it is, I think the right response from a compassionate Conservative government is, as we have done by the past two years, to stand by people at a time of need,” he said.
The Chancellor said that the most vulnerable would receive the most support but “with bills going up on this scale, everyone is going to feel the pinch – and that’s why we wanted to make sure there was support available to everyone on a more universal basis”.
He defended the use of the universal £400 energy discount as the best way to deliver help to “tens of millions” of people even though some would not need it.
An alternative method – rebates for council tax payers cutting out those on the highest bands – would still leave out some of those feeling the squeeze, he argued.
“There are lots of cases of people who will say ‘Hang on, I happen to live in this expensive looking house or in a high council tax band house but I need help too’,” Mr Sunak said.
He challenged critics to come up with a better policy.
“How else would you get the support to those on middle incomes who are working hard who do feel they need support – and I hear a lot from them every week?,” the chancellor said.
“Just because they’re not on benefits or they’re not pensioners – they still actually think ‘this is tough for me’… I do want to be on the side of those people.”
Labour’s shadow chancellor Rachel Reeves told Sky News that if the government had not spent months resisting a windfall tax, it “could have taken the time to get this package right”.
“It is not right that if you own a second or a third home you should get this £400 payment multiple times,” she said.
“This is only happening because this package has been rushed through.”