Rishi Sunak urged to announce emergency budget to rescue UK economy

·Finance Reporter, Yahoo Finance UK
·4-min read
British Chancellor of the Exchequer Rishi Sunak walks near the Treasury building in London, Britain, May 3, 2022. REUTERS/Toby Melville
Chancellor Rishi Sunak is set to outline state help in an emergency budget this summer. Photo: Toby Melville/Reuters

Chancellor Rishi Sunak is looking to make an announcement in August around the time when the energy regulator prepares the next price cap, amid mounting pressure for the government to act on the cost of living crisis. But he will stop short of holding an emergency budget.

The new support package is expected to expand cost of living support measures in order to shield households from a further jump in energy bills later this year, according to the FT.

Sunak has said he wants to wait to see how much further regulated energy prices rise at their next scheduled review in October before deciding what kind of extra support is needed.

Read more: UK economy shrinks in March as GDP falls

The new energy price cap could increase bills to an average £2,900 a year per household.

The chancellor has ordered officials to examine plans for a potential windfall tax on oil and gas giants.

Sunak has said he “stands ready” to do more to help households with their energy bills when the price cap is increased again in October.

“I’ve always said I stand ready to do more as we learn more about the situation,” he told Sky News.

“On energy prices in particular, the price cap protects people for some months to come.

“But I’ve said when we have a clearer picture about what happens with energy bills, we stand ready and I stand ready to support people further.”

Pushed on why he is waiting, Sunak said the Government announced £150 of council tax rebate for many households in February, and £200 off energy bills in October – a sum that will need to be paid back.

Boris Johnson has promised more help with living costs “in the months ahead”, after Michael Gove denied there would be an emergency budget.

The UK levelling up secretary said it would be “patronising” for him to intervene to advise people who were struggling to make ends meet and blamed the current squeeze on global inflation.

Gove told Sky News: “There won’t be an emergency budget. It is sometimes the case that the words from a prime minister or minister are over-interpreted. The prime minister is right. We will be saying more and doing more in order to help people with the cost of living challenge we face at the moment, but that doesn’t amount to an emergency budget. It is part of the work of government.

“Last night, the prime minister convened a group of ministers – we have all done work on some of the things we could do to help. Those policy initiatives will be announced by individual departments in due course as they are worked up.”

But TUC General Secretary Frances O’Grady said the UK government must choose between an emergency budget or the growing risk of a recession. “The Bank of England has warned the government that families are being forced to cut back, and the fall in demand will hit growth. But the Chancellor isn’t doing anything about it.

“The choice now is clear. Either the Chancellor steps up with an emergency budget to get pay rising, help families with soaring bills, and keep the economy moving. Or we risk sliding into recession, with families and businesses paying the price.”

Read more: Queen's Speech: How new laws will impact your pension pot

Boris Johnson told ministers to “go faster” in delivering ideas to alleviate the crisis, but is resisting pressure to hold an emergency budget.

Bosses called on the chancellor to intervene at pace and not adopt a wait and see strategy.

Tesco (TSCO.L) chairman John Allan has said that the case for a windfall tax was overwhelming in the face of the genuine hardship he had been seeing in stores.

John Lewis (JLH.L) boss, Sharon White, called on ministers to take the same “decisive action” seen during the coronavirus pandemic amid rising energy prices.

The Bank of England last week forecast that inflation in the UK will peak at more than 10% and warned the economy is at risk of recession.

Watch: Why are gas prices rising

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