Chancellor of the Exchequer Jeremy Hunt said the fall in energy prices won’t benefit the UK’s public finances, even though it lowers the cost of helping households with their utility bills.
(Bloomberg) — Chancellor of the Exchequer Jeremy Hunt said the fall in energy prices won’t benefit the UK’s public finances, even though it lowers the cost of helping households with their utility bills.
The projected decline in the cost of the government’s Energy Price Guarantee, which caps the maximum costs per unit of power and gas for ordinary Britons, is balanced by a decline in revenues from a tax on oil and gas company profits, Hunt told reporters in London on Tuesday.
“We don’t have that windfall,” Hunt said. “The net difference is marginal.”
Hunt has repeatedly said the Treasury has little room to show largess at the annual budget next month, and the chancellor’s remarks on Tuesday pour cold water on demands by his own Conservative backbenchers to cut taxes. They’re also likely to disappoint public sector workers, including nurses, doctors and teachers who are clamoring for pay rises that keep pace with soaring inflation.
Referring to data released earlier in the day showing a surprise budget surplus in January, Hunt said it didn’t represent a “recurrent” improvement in the national finances.
Need ‘Responsibility’
“Pay rises are recurrent and they have a recurrent cost to the Exchequer,” Hunt said. “What we see in today’s numbers is not a recurrent change in our national finances. It doesn’t change the fundamental outlook and the need for responsibility in the public finances.”
The chancellor also:
- Called US plans to subsidize clean tech a “real competitive threat”
- Said he’s considering how to unlock investment in clean tech from UK pension funds
- Said Britain mustn’t be technologically dependent on China
Government support for domestic energy currently caps the typical annual bill at £2,500 ($3,030), a figure that’s rising to £3,000 in April. With the government covering costs above the cap, the decline in energy costs reduces the amount it needs to spend on the household aid.
Britain’s wholesale gas and electricity prices have fallen from their highs in summer last year, back to levels seen before Russia’s invasion of Ukraine and its curtailment of gas flows to Europe — but still above historic normals. Wholesale gas prices alone have fallen 80% since August’s extreme levels.
But Hunt said that’s counterbalanced by a drop in revenue from a windfall tax on energy companies. “Broadly speaking the vast majority of the saving that you get from the reduction in energy costs is counterbalanced by a reduction in the predicted income from windfall taxes,” he said.
–With assistance from Todd Gillespie and Rachel Morison.
(Updates with further Hunt remarks starting in fifth paragraph.)
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