RISHI Sunak has defended his spending plans after his own economists said the poorest in society are unlikely to benefit from them.
The Chancellor set out a series of measures in the Spring Statement last week, including a reduction in fuel duty and a rise in National Insurance threshold.
However critics say the spending plans have left millions worse off, due to the rising cost of living and the lack of support for those who are unable to work.
Speaking to MPs today at the Treasury committee, officials from the Office for Budget Responsibility (OBR) said those who are already struggling will be unlikely to benefit from Mr Sunak’s latest measures.
They also said the retail price index of inflation could rise above 10 per cent, and the price of fuel could go up by 6% when the fuel duty cut comes to an end in March next year.
Mr Sunak defended the plans, saying it would have been “irresponsible” for the Government to have borrowed more to raise benefits in the face of rising inflation.
The committee chairman, Conservative MP Mel Stride, said the Chancellor had done “very little” for those who were out of work and relying on benefits.
Mr Sunak said: “If someone’s view is Government can or should make everybody whole for inflation – particularly inflation at these levels caused by global supply factors – then that’s something that I don’t think is doable.”
He said that raising benefits by the current rate of inflation – which is forecast to rise to more than 8% – rather than what it was last September, would have added £25 billion to Government borrowing in the period up to 2026-27.
He said that “irresponsible” borrowing levels risked stoking inflation even further, adding to the pressure on living standards.
“We are already forecast to borrow in this coming year about 60% more as a percentage of GDP than our post-war average, 20% more as a percentage of GDP than we were forecast to borrow in October, so it is already a significant amount of borrowing,” he said.
“My view is an excessive amount of borrowing now is not the responsible thing to do.”
Mr Sunak said his decision to announce he intended to cut the basic rate of income tax from 2024 would inject “discipline” into the debate about public spending levels.
“Now having something to aim for means that hopefully we can have a more disciplined conversation about incremental public spending at this point, which is already at very high levels,” he said.
“My priority at this point forward is to keep cutting taxes, not increased public spending.”
SNP MP Alison Thewliss challenged the Chancellor his previously-announced plans to give people a £200 loan on their energy bills, to be repaid over the next five years.
She said that people already struggling will be forced into even more debt with the mandatory £200 government loan, and urged Mr Sunak to convert it into a non-repayable grant instead.
However the Chancellor refused to describe the payment as a loan, and said he believed it was helping people who were going to be stretched to pay for their energy bills when the price goes up in April.
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