Prime Minister Rishi Sunak will raise concerns about US President Joe Biden’s Inflation Reduction Act at a meeting in Washington, D.C. on Thursday (June 8).
Senior members of the UK Government have criticised Mr Biden’s bill, which offers subsidies aimed to boost green industries.
It has been labelled by critics as “protectionist,” as it could impact British firms hoping to trade with the US in favour of domestic companies.
Speaking to reporters in the US, Mr Sunak said that G7 countries “don’t believe in protectionism as the answer” to the challenge.
“All countries are going to invest in making sure they can make the transition to net zero. We’ve got a head start over everybody because we decarbonised faster than any other G7 economy,” he said.
He added: “By combining our vast economic resources and expertise, we will grow our economies, create jobs and keep our people safe long into the future.”
What is the Inflation Reduction Act?
There are three main strands to the bill, including climate change, lowering the cost of prescription drugs, and tax reform. Here are the main points:
Climate Change
The bill would invest more than $300 billion in energy and climate reform, the largest federal clean energy investment in U.S. history. It also has support from many environmental and climate activists. However, it’s short of the $555 billion the Democrats originally called for.
This portion of the bill takes on transportation and electricity generation, as well as including $60 billion for growing renewable energy infrastructure in manufacturing, such as solar panels and wind turbines.
It also includes tax credits for individuals on electric vehicles and makes homes more energy efficient.
According to Democrats, the bill will lower greenhouse gas emissions by up to 40 per cent by the end of the decade compared to 2005 levels, which is short of the 50 per cent Biden aimed for.
Lowering the cost of prescription drugs
On health reforms, the bill aims to make prescription drugs more affordable — but there are a few limits.
The bill includes a historic measure that allows the federal health secretary to negotiate the prices of certain expensive drugs each year for Medicare, and capping Medicare recipients’ out-of-pocket prescription drug prices at $2,000 a year.
However, the moves won’t impact every prescription drug or every patient, and they won’t take effect any time soon. The negotiations will take effect for 10 drugs covered by Medicare in 2026, increasing to 20 drugs in 2029.
Tax reform
The legislation passes a 15 per cent minimum tax for corporations making $1 billion or more in income and bringing in more than $300 billion in revenue.
A major portion of the bill that isn’t included, however, due to opposition from West Virginia Senator Joe Manchin, is extending Child Tax Credit.
What did President Biden and other Democrats say about the Inflation Reduction Act?
In a statement celebrating the bill’s passage, President Biden said: “Today, Senate Democrats sided with American families over special interests, voting to lower the cost of prescription drugs, health insurance and everyday energy costs and reduce the deficit, while making the wealthiest corporations finally pay their fair share.
He added: “I ran for president promising to make government work for working families again, and that is what this bill does – period.”
Chuck Schumer, the Senate majority leader, said: “While there was one unfortunate ruling in that the inflation rebate is more limited in scope, the overall program remains intact and we are one step closer to finally taking on big pharma and lowering Rx drug prices for millions of Americans.”
The bill’s narrower focus frustrated the progressive senator Bernie Sanders, who criticized the compromise in a Saturday floor speech.
“This legislation does not address the reality that we have more income and wealth inequality today than at any time in the last hundred years,” Sanders said. “This bill does nothing to address the systemic dysfunctionality of the American healthcare system.”
What have Republicans said about the Inflation Reduction Act?
Republicans fiercely criticised the bill, rejecting Democrats’ arguments that the legislation will help tackle rising prices.
Senate Republican leader Mitch McConnell said on Saturday: “Democrats want to ram through hundreds of billions of dollars in tax hikes and hundreds of billions of dollars in reckless spending – and for what?
“For a so-called inflation bill that will not meaningfully reduce inflation at all.”
