Brits may need more cost of living help before the next year is out, Rishi Sunak admitted today despite announcing £15billion.
The Chancellor yesterday unveiled a package including £400 per household off energy bills, two £325 payments for 8.3million people on benefits, £300 for poorer pensioners and £150 for disabled people.
He claimed the most vulnerable would be able to claim about £1,200 of the cash and discounts, "about the same amount" as energy bill rises across the year.
But for some people bills rises could be even higher. Monthly bills were based on a £1,277-a-year price cap last October and will be based on a £2,800-a-year price cap this October - a difference of more than £1,500 a year.
This could be balanced out by the price cap coming back down again in April. But analysis by Cornwall Insight shows that even if energy bills are reviewed every three months, the cap is likely to be around £2,800 until the end of March at least.
And that is before rocketing inflation of 9%, restraint in public sector wages and Tory tax rises are taken into account.
Mr Sunak said: “No Chancellor could sit here and promise that we can completely and entirely solve this problem for everyone.”
But he accepted more help may be needed by this time next year. Asked if he'd have to act again, he told the BBC this morning: "We’re sitting here in May, we don’t know what energy bills will be next April.
"I think people can judge me by my actions over the past couple of years.
"I’ve always tried to be responsive to the situation that the country and the economy is experiencing and will always act like that."
He did, however, suggest further help will be less likely to be needed because benefit and pension rises are set to rise by September's inflation figure in April 2023. That could be close to 10%, the highest rise in three decades.
He said: "Looking forward, what is likely to happen is benefits and pensions next year will go up by this year’s much higher inflation level and that is forecast to be much higher than the inflation people will actually experience next year.”
He said support now would be “meaningful help over this year until we get to that point”.
Boris Johnson today admitted Brits will have a “difficult period” but said “we can’t cover everybody’s extra cost”.
The PM appeared to downplay hopes of extra help, saying he was “confident” energy prices would start coming down and the rescue package would suffice “until prices start to abate”.
That is despite analysts Cornwall Insight estimating the price cap may only fall to £2,500 in April 2023 - £300 lower than over the winter, but £500 higher than it is now.
The PM told Bloomberg News: “We’re going to have a difficult period, and we’ve got to be absolutely clear with people it’s going to be difficult, and the government cannot solve every problem.”
He added: “We can’t cover everybody’s extra cost. But what we can do is make sure that we deal with the underlying causes of inflation, but also keep our economy strong and open to investment.”
Officials insisted the vast majority of gains go to the poorest households. The Resolution Foundation said average gains for the poorest fifth are £823 compared to £296 for the richest fifth, from today’s announcement.
But critics warned it may prove to be a “sticking plaster” as the Chancellor opted for one-off cash handouts instead of permanent rises to benefits.
Meanwhile, £10bn of the £15bn will be funded by borrowing despite the Chancellor repeatedly saying he could not borrow his way out of the crisis.
And insiders accept the huge giveaway could itself make inflation worse - something OBR forecasts may confirm later this year.
Mr Sunak accepted there may be an impact on inflation but insisted it would be "minimal" and "much less" than 1%.
