The Chancellor of the Exchequer (Rachel Reeves)
Thank you, Mr Speaker, for granting me permission to make this statement to the House about the Government’s continued response to the war in the middle east.
Let me start by paying tribute to our armed forces; my thoughts and the thoughts of the whole House remain with them and with those whose lives have been disrupted by this conflict.
Since I last addressed the House, the costs of oil and gas have remained high, and last week the Bank of England estimated that inflation could be between 3% and 3.5% in the next few quarters. The full economic impact of the war remains uncertain, but it makes our economic plan even more important: to build prosperity that is secure and resilient and to bear down on the cost of living and protect the public finances, with delivery through our iron-clad fiscal rules. Today, I will set out further action that I am taking.
First, on global collaboration, last week the Prime Minister authorised the US to use UK military bases to defend the strait of Hormuz. It remains the case that the best way to protect families and businesses is rapid de-escalation of this conflict. To strengthen our collective security, I have announced that we will explore a new defence financing and procurement mechanism with the Netherlands, Finland and other EU and NATO partners. I welcome the International Energy Agency’s decision to authorise a co-ordinated release of our collective oil reserves to alleviate the immediate pressure on supply, and the UK has now begun the release of our share of 13.5 million barrels of oil.
Secondly, on our energy security, the last Government’s failure to invest in energy was a failure to protect our country, but through determined action, this Government are taking control of our own energy supply: we are investing in renewables, lifting the ban on onshore wind and streamlining grid connections; we ran the biggest offshore wind auction in European history last year, and we are bringing the next renewables auction forward to this July; and we are driving forward negotiations on the UK’s participation in the EU internal electricity market. We must guarantee that our domestic oil and gas industry can also play a role in our energy system for decades to come, so I can confirm that we are encouraging investment in tiebacks to make the most of our existing production facilities.
We are rewriting the story on nuclear, too. We have construction on Sizewell C, have agreed an extension to Sizewell B, and are due to sign the contracts on the UK’s first small modular reactors in Anglesey, in partnership with Rolls-Royce. I will not tolerate red tape and vested interests holding back our energy security, so our new planning rules will unblock the pipeline of critical infrastructure projects. I can announce today that we will legislate to implement the Fingleton review in the next Session, and I recently wrote to industry and regulators to get them to set out their plans to fast-track that implementation in full.
To the Opposition parties, which like to talk big about energy security but then vote against the very infrastructure to build it, let me say this: it is time to put our country first. I can confirm today that we are developing options to back critical energy projects with indemnities if their planning consent is challenged, so that we do not waste a single moment in protecting our energy security, because energy security is national security.
Thirdly, on households and businesses, I know that when prices rise and incomes are squeezed, people look to the Government and ask, “What are you doing to help?” That is why, since the election, we have delivered and funded 30 hours of free childcare to working parents, with wages rising faster than prices for every month that I have been the Chancellor and free breakfast clubs being rolled out at primary schools. From next week, this is what will see: the two-child limit—gone; day one sick pay—in; another rise in the national living wage; prescription charges—frozen; train fares—frozen; fuel duty—frozen; and the state pension increasing by £575. For businesses, there is £4.3 billion in business rates support; the regulation action plan, which will cut admin costs; and the supercharger discount, which will be followed next year by the British industrial competitiveness scheme to take money off business energy bills. But I know that there is more to do.
On trade, I can confirm to the House that we are aiming to conclude negotiations with the EU this year on the sanitary and phytosanitary agreement, which will directly impact food prices in our shops. I have also asked officials to look at where targeted reductions to agrifood tariffs can help bring down food prices, balancing this against the implications for domestic producers and food security. Later this week, I will be holding meetings with supermarkets and banks to discuss how they can further support their customers.
We have a world-class competition and consumer protection regime. Since my last statement, the Competition and Markets Authority has stepped up its statutory monitoring of fuel prices, and I will update on fuel pricing within the next month. The CMA is working with Government to monitor the cost of household essentials for both price rises and disruption, and has launched a market study into heating oil. Today, I can announce that we are going further to make sure that the Competition and Markets Authority has the powers it needs—powers that were denied to it by the previous Government—to detect and crack down on price gouging, bringing in a new anti-profiteering framework and considering time-limited, targeted powers for the CMA and other regulators. This week, the Business Secretary and I will convene the regulators’ council to discuss its work to protect consumers, because—let me say it again—this Government will not tolerate any company exploiting this crisis at consumers’ expense.
Finally, I want to update the House on how I am preparing for this conflict as it goes on. I know that families and businesses are worried about the impact of rising prices. I have said that we will be responsive to a changing world and responsible in the national interest, and today I want to set out in more detail what that means.
First, we will be responsive. We do not yet know what the full impact of this conflict will be, so we must be agile in responding appropriately at each moment. We extended the 5p fuel duty cut and have pushed out the cheaper fuel finder, empowering people to avoid rip-off prices, and chasing down the last few filling stations to reach 100% compliance. When wholesale kerosene prices more than doubled overnight, we stepped in within a matter of days with £53 million of support for those who needed it most. From next week, households will benefit from £150 off their energy bills thanks to the action that I took in my Budget, with the price cap giving households certainty on their bills until July, ahead of the winter months, when people use 78% of their gas.
Secondly, we will be responsible. The spring forecast showed that the Government have the right economic plan, restoring stability to our country’s finances and family finances. I will not put that stability at risk. As we respond to this crisis, we must learn from the mistakes of the past. The previous Government pushed up borrowing, interest rates, inflation and mortgage costs with an unfunded, untargeted package of support under Liz Truss. That gave the most support to the wealthiest households: between 2022 and 2024 under the last Government, households in the top income decile received an average of £1,350 of direct energy bill support. That left us with high levels of national debt—a cheque written then for a bill that is still being paid today. I can confirm to the House that contingency planning is taking place for every eventuality, so that we can keep costs down for everyone and provide support for those who need it most, acting within our iron-clad fiscal rules to keep inflation and interest rates as low as possible.
This is not a war that we started, nor is it a war that we joined—notwithstanding the advice of the Opposition parties—but it is a war that will have an impact on our country. The challenges may be significant, but I promise to do what is right and fair, being responsive in a changing world and responsible in the national interest. I commend this statement to the House.
Sir Mel Stride (Central Devon) (Con)
I thank the Chancellor for advance sight of her statement.
The right hon. Lady comes to the House with an economy in tatters. She would have us believe that she has delivered the stability and resilience that can weather the storm ahead, but she has done nothing of the kind. When she came to office, she ramped up borrowing and spending and hiked taxes to record levels. She was warned at the time, by the Office for Budget Responsibility and others, that her policies would mean higher inflation, higher borrowing costs and higher interest rates, and that she would destroy jobs. All of that has come to pass. Her mismanagement and foolish choices have given us the highest inflation in the G7, the highest borrowing costs in any major advanced economy—with gilt yields higher than those of Greece and Morocco—fragile fiscal headroom, the highest unemployment since the pandemic and rising, and GDP per capita falling. Under this Government we are getting poorer, and our economy is increasingly fragile and far from secure and resilient.
Despite what the right hon. Lady has said about tiebacks, nothing exemplifies this Government’s economic folly more than their approach to oil and gas. The utterly misguided net zero obsessions of the Energy Secretary have led to the absurdity of reduced extraction, while we see jobs destroyed, tax revenues forgone, and energy security smashed. The greatest tragedy of all is that in Jackdaw and Rosebank we have fields ready to go. In just months, they could be pumping vital relief to millions. Jackdaw alone has enough gas to supply more than 1.5 million homes, yet the right hon. Lady has nothing to say on that matter. Less oil and gas extraction means greater dependency and less security: this road leads to ruin. On energy, on the cost of living, on jobs, on growth, on public finances, on every measure that matters, the Chancellor has left us weak, weak, weak, and in the face of this energy shock, millions are about to suffer as a result.
With respect to her statement, may I ask the right hon. Lady the following questions? How many fuel retailers have yet to engage with the new fuel finder service, and can she comment on the widespread reports of technical glitches and out-of-date price information? She mentioned the small modular reactor planned for Wylfa, but given the need, can she explain why she has chosen not to go ahead with the large-scale nuclear site that was signed off by the last Conservative Government? On the specific subject of energy cost support, may I ask what fiscal capacity she believes she has to support those in need, and what plan she has to ensure that any targeted approach truly reaches all of them?
In her statement, the Chancellor criticised the last Conservative Government’s support package for not being targeted, but what she failed to mention was the fact that the present Prime Minister was then urging for support to be universal. Indeed, he said at that time that Labour’s approach would ensure
“that no household would pay a penny more on their bills.”—[Official Report, 8 September 2022; Vol. 719, c. 404.]
We have had no consistency from the right hon. Lady. How is she going to ensure that support for people depending on heating oil reaches those who need it most? Of course, that support, under this Government, will be funded through the taxes of hard-working people. Indeed, the reduction to energy bills this April is simply being taken from bills and dumped on to the shoulders of hard-pressed taxpayers.
It does not need to be this way. Is not the critical question this: where is the control of public spending? Where is the renewed resolve to grasp the welfare bill to get people off benefits and into work? I will tell you, Mr Speaker: it is nowhere, because the right hon. Lady is a captive of her own Back Benchers and has brought our economy one step from its knees. She knows it, the country knows it, and now we must all brace ourselves for what is to come—not from a position of strength, as the right hon. Lady is so desperate to have us believe, but from a position of weakness of her own making.
Rachel Reeves
That statement revealed only that the shadow Chancellor is utterly out of his depth. In the past 20 months, we have had six cuts in interest rates. We have more than doubled the fiscal headroom compared with the headroom that I inherited from the Conservative party. For the first time in six years, our deficit is less than 5% of GDP, and wages have increased by more than inflation in every single month that I have been Chancellor of the Exchequer. Compare that with the record of the previous Conservative Government, who oversaw the only Parliament on record in which people were poorer at the end of it than they were at the beginning. I prefer my record to their record any day of the week.
The shadow Chancellor says that we should act. Well, we have acted, but what he fails to mention is that his party supported our being involved in this conflict. Whereas we have called for de-escalation, the Leader of the Opposition said that we should be a participant in this conflict. The damage that that would have done to our economy would have been immense, yet the Conservatives make no apology for that.
The Leader of the Opposition said yesterday about the Prime Minister:
“If he’s creating a support package, that’s going to be done with taxpayers’ money.”
She thinks that we should be doing things that are not going to cost taxpayers money. The shadow Chancellor says that we should do more and put in more money, but the Leader of the Opposition says that we should not do anything. Where does the Conservative party now sit on the £53 million of support that we gave on heating oil? That was using taxpayers’ money to support those who needed it most. It was the right thing to do, but now the Leader of the Opposition seems to suggest that it was the wrong thing to do.
The shadow Chancellor asked a few specific questions. On the cheaper fuel finder that we have introduced, more than 90% of retailers have signed up to it, and of that 90%, all of them are updating their prices regularly. Along with the Competition and Markets Authority, we are chasing down the final few that have not submitted their prices.
On small modular reactors, the Conservatives say they supported it. They had 14 years, and they put not a single penny into it. The same is true of Sizewell C. They cannot say that we should spend less money and at the same time say that we should support Sizewell C and small modular reactors, because everything has to be paid for.
On fiscal capacity, we have more than doubled the headroom compared with what I inherited from the Conservatives. It was less than £10 billion when I became Chancellor of the Exchequer; it is now nearly £24 billion because of the actions that I have taken. The shadow Chancellor says that we have not built contingency, but the exact opposite is the case.
The shadow Chancellor asks about Rosebank and Jackdaw. It was because of the failure to do the work properly that they were challenged in the courts. One month after the previous Government left office—because they were kicked out—the courts came back and said that we had to reconsider scope 3 emissions. The energy companies Shell and Equinor resubmitted their plans at the end of last year. [Interruption.] The regulators—
Mr Speaker
Order. Members can go and have a discussion outside if they cannot be quiet here.
Rachel Reeves
Thank you, Mr Speaker.
The energy companies came back at the end of last year with their revised plans, and the regulators are now considering those. Ahead of the autumn, my right hon. Friend the Energy Secretary will to decide whether it is legal to go ahead with them, but we made a commitment in our manifesto to honour existing licences. It is only because of the failure of the previous Government to consult that we are in this position in the first place.
The shadow Chancellor says that if we cut the welfare bill we will be able to help people. Well, I am afraid the Conservatives had 14 years in office and he was the Welfare Secretary when the bill ballooned. Frankly, we will take no lessons from the Conservative party. It is only the Labour Government who can be responsive to the immediate challenges, because we have been responsible with the public finances. We are committed to our long-term energy security, and committed to making the right decisions in the national interest.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
As the Prime Minister said yesterday, we have no idea how long this conflict will be and he is not assuming that it will be over quickly. We live in troubled times, and it is quite right that the Chancellor of the Exchequer is making serious contingency plans as we move through spring and summer and into autumn and winter. As she well knows, one of the challenges of targeting support is the availability of data. What is she doing to make sure that the data is available—not just across Whitehall, but in local government and in the energy companies themselves—to target support at those who need it most?
Rachel Reeves
That is a really important point. The previous Government had not done the contingency planning, so when the energy price shock came along, they said, “We are not going to provide any support.” In the end, they had a choice between doing nothing or providing blanket support. It was that blanket support that cost £78 billion. We have been working with the Department for Work and Pensions, local Government and others to ensure that we will be able to target support at those who need it most, but that is in addition to taking £150 off everyone’s energy bills already. We are doing the work. The prices come down in April for the following three months, and we are a long way off the winter, when 78% of gas is used by households.
Daisy Cooper (St Albans) (LD)
I thank the Chancellor for advance sight of her statement. Our thoughts are with our brave armed forces at this time.
I agree that the last Government’s failure to invest in energy was a failure to protect our country. Today we face the stark reality that we cannot guarantee our national security, our energy security or our food security. When the Liberal Democrats were in government, we launched the auction for onshore wind and established the Green Investment Bank, helping to drive down costs and quadruple renewable energy. The Conservatives’ decision to scrap the Green Investment Bank has left our energy system more exposed, and should be worn as a badge of shame.
To shore up our energy security and to tackle the energy crisis, we Liberal Democrats have consistently argued for a three-pronged approach: first, to reduce energy demand by incentivising households and businesses to invest in energy efficiency, without the tax penalties built into the business rates system or prohibitive up-front costs; secondly, to fix the broken energy market that is unfairly inflating prices, especially for small businesses on our high streets; and thirdly, to provide targeted support for the most vulnerable and for those with the highest energy needs. I urge the Chancellor to consider our proposals to create an energy security bank that can offer low-interest loans for energy-saving improvements for households and small businesses, to reverse the cuts to home insulation programmes, and to exempt business investment in energy efficiency from business rates calculations.
Although the action from the Competition and Markets Authority is welcome, it is not enough. Small businesses have been blocked from the best energy deals for years—well before Donald Trump started bombing Iran—yet there has still been no CMA investigation into suppliers blocking access to those fair deals. I ask the Chancellor again: will she please instruct the CMA to do that investigation without delay?
On targeted support, families are fearful. Will the Chancellor consider zero-rating VAT on heating oil and liquefied petroleum gas and introducing a price cap mechanism for off-grid fuels? Will she commit to halving energy bills over the next decade by reforming pricing structures? If bills rise to more than £400 a year, as some are warning, will the Chancellor commit to coming back to this House and outlining a broader support package so that many struggling households do not face a crippling hit of that scale?
Rachel Reeves
I thank the hon. Lady for her questions. Nick Clegg once said that it would take 10 years to get nuclear power up and running so there was no point in doing it, as it would come on stream only in the 2020s. Imagine if that Deputy Prime Minister had not blocked investment in nuclear energy then—we would have the benefits of it today. The Liberal Democrats had a chance when they were in government, and they did absolutely nothing. The Conservatives opposed onshore wind, which is also helping to bring down bills.
In terms of supporting investment in renewables and energy security, we have created the National Wealth Fund, which is prioritising investment in defence and energy security, including in critical minerals in Cornwall, carbon capture and storage and the roll-out of chargers for electric vehicles. We have also put £14 billion into the warm homes plan to subsidise and support people to make energy improvements in their homes in order to reduce their energy consumption and therefore their bills, alongside doubling the number of people eligible for the warm home discount. We are looking at improvement relief through the business rates consultation to ensure that if people do make improvements, including on energy efficiency, they will not then be whacked with higher business rates.
The hon. Lady said that we should cut VAT on heating oil. When the Liberal Democrats were in government, they increased VAT on everything, so it is a bit rich to say that they want to cut it now. We have asked the Competition and Markets Authority to do a review into heating oil, which I set out today, in addition to the £53 million of support we have put in.
There seems to be a slight contradiction in what the hon. Lady is saying—does she want targeted support or blanket support? I argue that the progressive, universal approach that we are taking is the right one. It means £150 off everyone’s energy bills, but also targeted support for those who need it most. We cannot repeat what happened when Liz Truss was Prime Minister—we are still paying the price for the cheque that was written then with higher interest rates, inflation and taxes than we would otherwise have had.
Jon Trickett (Normanton and Hemsworth) (Lab)
I welcome the Chancellor coming to the House as soon as possible to make a statement. On profiteering in the fuel sector, the last time there was a problem with oil prices was after the war began in the east, when the then Government, following their laissez-faire market policies, allowed prices to rip to an extraordinary extent. The consequence, as we saw, was outrageous profiteering in the energy sector. Will the Chancellor indicate that we will not follow the Conservatives’ failed laissez-faire ideology, and that we will instead intervene directly in the market to prevent outrageous profiteering from occurring on this occasion?
Rachel Reeves
I thank my hon. Friend for that question. That is why we have the energy profits levy and the electricity generator levy—so that we can claw back any excess profits. It is also why we believe in an active and strategic state, including through empowering our regulators, like the Competition and Markets Authority, to ensure that the price gouging we have seen in the past cannot happen after the conflict in the middle east.
Sir Edward Leigh (Gainsborough) (Con)
In an attempt to get some consensus here, I commend one part of the Chancellor’s statement, where she said:
“We must guarantee that our domestic oil and gas industry can…play a role in our energy system for decades to come”.
Is there not a sensible, middle-of-the-way approach here? We should by all means proceed with green energy—such as offshore wind, in which we lead the world, in the North sea off the Lincolnshire coast—but we should also keep an open mind about new extraction from the North sea. I was listening carefully to what she said to the shadow Chancellor. Will the Chancellor confirm today that the Energy Secretary will keep an open mind when he considers these licences, so that we can guarantee our resilience in the future?
Rachel Reeves
I thank the right hon. Gentleman for his approach and for his question. The oil and gas industry plays an important role in our energy system and will do so for decades to come. We very much welcome the jobs that it creates, the tax revenue that it provides and, most importantly, the energy security that it offers. In my Budget, I set out the new North sea oil and gas strategy, which includes allowing the use of tiebacks or infills on existing sites. For the reasons I have explained, the Secretary of State for Energy Security and Net Zero now has to take a quasi-judicial decision on Rosebank and Jackdaw. He will, of course, approach that decision with an open mind because this Government recognise the importance of our oil and gas sector.
John Grady (Glasgow East) (Lab)
Does my right hon. Friend agree that the essential truth is that the Government have introduced a package of measures to make the poorest families in Glasgow and across the United Kingdom better off, whereas the Conservatives propose plunging those families back into extreme poverty? They left us with ridiculous levels of debt and the weakest defence since the 1930s—their record is absolutely shameful.
Rachel Reeves
My hon. Friend is right, but I would say it is worse than that in Scotland, where there is the legacy of two awful Governments: the Conservatives made people poorer, while the SNP Government fail to back our nuclear sector, which could deliver cheaper bills for people in Scotland.
Sir Jeremy Hunt (Godalming and Ash) (Con)
Could I gently ask the Chancellor to be less partisan at a time of crisis? If she brings before the House difficult measures that are right for the country, she will have the support of the whole House, but if she is partisan, she will not. I actually rise to support her basic instinct, which is for targeted rather than universal support. Four years ago, energy bills were heading to £4,000. We are at nothing like that now, and we do not know what the oil price will be next week, let alone this winter. Although we gave support to households and families last time by increasing borrowing, with her support, we cannot react to every single economic shock by further increasing our national debt. Will she confirm that when she comes to the House to announce targeted support, it will be fully funded in her Budget and not funded by increasing our national debt yet again?
Rachel Reeves
I thank the right hon. Gentleman for that question. When he became Chancellor, it was on the back of lots of promises that there would be no support for energy bills. He and others recognised that that position was not sustainable, but work had not been done on how to introduce a targeted system, so the choice was a binary one between blanket support or no support. The right hon. Gentleman took the right approach then by ensuring that people’s energy bills did not go through the roof; however, a targeted approach would be more appropriate, because under the previous approach, the top third of families got more than a third of the benefit. That is not right or sensible—all it does is drive up inflation, interest rates and taxes in the future. It is not the fault of the former Chancellor that that approach was taken, but we are using this period, when energy prices are actually falling because of the approach I took in the Budget, to ensure that we are in a position to take a targeted approach in the autumn.
Luke Murphy (Basingstoke) (Lab)
I am grateful to the Chancellor for her statement, and in particular for setting out the long list of interventions this Government have made on the cost of living, which stands in stark contrast to the record of the Conservatives, who left behind the worst legacy on living standards in a generation. Can the Chancellor confirm that in the weeks and months to come, as she takes decisions on encouraging regulators to take action and in contingency planning, she will keep in mind the need to protect our constituents’ living standards while ensuring economic stability?
Rachel Reeves
That is why what we did in the Budget last year was so important. In other countries, domestic energy bills are now going up, but because of the measures that I took in my Budget last November, energy bills will fall from 1 April, despite everything that is happening in the middle east. However, what would have the biggest impact on bills is an escalation in this conflict, which is what the Conservative party initially wanted to happen.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
Shetland is home to one of the largest onshore wind farms in the country, the operators of which are paid millions not to generate electricity because of grid constraints. As a result, the announcement this morning of a trial of discounted energy rates for communities such as ours will be met—possibly—with some excitement. When will we hear the details of how that will work and what it will mean in terms of reductions to the bills of my constituents?
Rachel Reeves
On the point about national grid infrastructure and why we end up paying for energy that cannot be used, we have to speed up those connections. That is why I spoke about consulting on indemnities for building out infrastructure, even in the case of judicial review. We must act in the national interest and get this infrastructure built. At the same time, the Secretary of State for Energy Security and Net Zero will set out in more detail the specific ways in which we can bring down prices for communities, including those of the right hon. Member.
Melanie Ward (Cowdenbeath and Kirkcaldy) (Lab)
My constituents are appalled by supermarkets and other petrol retailers that are price gouging and profiteering from global instability and a middle east war that was backed by both the Tories and Reform. Let us make no mistake: if they were in government, our country would be right in the middle of it. Will the Chancellor set out the action that she is taking to clamp down on price gouging? I thank her for the £9 million announced yesterday to help my constituents in Cowdenbeath and elsewhere affected by the changes at Mossmorran.
Rachel Reeves
I thank my hon. Friend for those questions and for her campaigning work on Mossmorran to ensure that we can properly support her community, which we are also doing with our growth mission fund. We have introduced the cheaper fuel finder to ensure that price gouging does not happen, as it provides greater transparency on the prices offered by different fuel retailers. This is something that the previous Government could have done in their 14 years in power. France already has a cheaper fuel finder available on a number of apps, which can be used when people are travelling. We are introducing that system here because we want to ensure that our constituents pay the lowest price possible when they fill up their tanks.
Dame Harriett Baldwin (West Worcestershire) (Con)
Given the current crisis, does the Chancellor regret in her first Budget increasing unfunded borrowing by £150 billion over this Parliament, which the Office for Budget Responsibility said at the time was
“one of the largest fiscal loosenings of any fiscal event in recent decades”?
Rachel Reeves
The Conservative party once believed in fiscal discipline, but that has gradually eroded over time. It is because of the fiscal rules that I introduced that we have been able to invest in Sizewell C and in small modular reactors. That was not possible under the fiscal rules of the previous Government. I would also say that borrowing fell in the last year. That did not happen in the last few years of the previous Conservative Government.
Rachael Maskell (York Central) (Lab/Co-op)
I thank the Chancellor for her statement. I am sure she will agree that our biggest concern is the intersection between poverty and food and energy price hikes for our constituents. As she looks ahead, will she consider a warm homes prescription to protect people’s health by keeping their homes warm, which would also save money, and will she ensure sufficiency in the crisis and resilience fund, so that local authorities can invest in those in the greatest need?
Rachel Reeves
I thank my hon. Friend for that question. From next month, families with children will benefit from the abolition of the two-child cap in the universal credit system. We have also doubled the number of recipients of the warm home discount and put £14 billion into upgrading people’s homes through the warm homes plan. Of course, as we look at targeted support, we will consider vulnerabilities within that.
Wendy Chamberlain (North East Fife) (LD)
The Chancellor has mentioned several times that households will benefit from £150 off their energy bills, but I had a constituent on the phone this morning who has been told that his energy bills are still rising and will not see the savings that the Chancellor is talking about. What conversations is she having with energy companies to make sure that people do actually benefit from the fall in bills that she is so keen to talk about?
Rachel Reeves
I would be very happy to see the particular details of that constituent, because energy companies—through both fixed and variable tariffs—are passing on that £150 reduction that I introduced in the Budget by getting rid of the energy company obligation levy entirely and by moving other levies from bills on to general taxation. I am happy to look at the particular circumstances of that individual, but people should be getting, on average, a £117 cut in their energy bills from 1 April.
Jim Dickson (Dartford) (Lab)
I thank the Chancellor for her statement. As she says, we have made good progress on stabilising our fiscal and economic situation since the 2024 election. Most notably, we have increased the headroom available on our public finances, but as a result of the previous Government failing to invest in sustainable energy and nuclear, we are much more exposed to price shocks than we could be. Does she agree that it is vital that we do all we can to protect the most vulnerable in our community, including those among my constituents in Dartford, from the energy price hikes will result from this middle east war?
Rachel Reeves
For my hon. Friend’s constituents in Dartford and for people around the country, there have been six interest rate cuts since the general election. The more than doubling of the headroom means that we have a bit more room for manoeuvre in the face of shocks. However, gas has set the price for energy at a third less than it was just four years ago, because of this Government’s investment in renewables.
John Glen (Salisbury) (Con)
I welcome the targeted nature of these measures, but three weeks ago it looked like inflation was going to return to the level that the right hon. Lady inherited when she took office in July 2024. That is no longer going to happen, but we are now seeing it the cost of borrowing. Given that we are spending well over £100 billion a year on debt interest, what assessment has the Chancellor made of the implications for the public finances of higher inflation and higher borrowing costs?
Rachel Reeves
It is because of those concerns and not wanting to put any upward pressure on borrowing costs or inflation that we are looking at what targeted support can be offered, rather than the blanket support we saw the previous time energy bills went up. The Bank of England offered its assessment on the potential impacts on inflation, but as the Governor of the Bank of England has also said, the upward pressure on inflation because of the conflict in the middle east is tempered somewhat by the action that I took in my Budget last year, which reduces inflation by between 0.4 and 0.5 percentage points, taking off some of that upward pressure on inflation.
Dan Carden (Liverpool Walton) (Lab)
I thank the Chancellor for her statement. May I ask her to do something for a specific group of people? Constituents who have to rent their home in the private rented market, especially those in more deprived communities like mine, will see their energy bills go up, but their biggest outgoing each month will still be their rent, which all too often is exploitative in areas like mine. We had rent controls in this country from the first world war up until the dying days of Margaret Thatcher’s Government. What can she do, thinking outside the box, to tackle this issue?
Rachel Reeves
I recognise that in my hon. Friend’s constituency, like in mine and many others, more people are in private rented accommodation than own their own home. One reason for introducing the Renters Rights Act 2025, which was opposed by the Conservative party, is to give people greater certainty, to enable them to challenge increases in their rents, and to give them greater rights over eviction, which was done to help his and all of our constituents.
Dave Doogan (Angus and Perthshire Glens) (SNP)
Just three weeks ago at the spring statement, I cautioned the Chancellor that significant fiscal intervention would be required to protect businesses and households in the face of the war in the middle east. She said at that time that, thanks to her actions, the finances of the UK were in robust condition. Now she prevaricates in order to protect those self-same public finances. Those two things cannot be true at the same time. Some 13% of my constituents are reliant on oil; in Scotland the figure is 5%, in England 2%, and in Leeds West and Pudsey it is 0%. Perhaps that is why she provided just £53 million to support oil users, which will not even touch the sides.
Rachel Reeves
It took 200 days for the previous Government to act on heating oil, and it took us under two weeks. We have put in £53 million, and that money is allocated based on heating oil usage in different parts of the country. None of the £53 million will go to help my constituents in Leeds West and Pudsey because we do not use heating oil, but there will be support for Scottish and Northern Irish constituencies and many others, because it is the right thing to do.
Brian Leishman (Alloa and Grangemouth) (Lab)
It is expected that food inflation will hit 4%. That means that a typical family’s annual grocery bill will increase by approximately £240. In Scotland, approximately 1 million people experienced food insecurity in the last year, and food insecurity is closely linked to access to and consumption of fruit and vegetables. The Chancellor said that she will meet with supermarkets, but what will the asks and demands be so that people can access nutritious and affordable food?
Rachel Reeves
The two-child limit for universal credit will be lifted from next week, and food banks have said that that will reduce reliance on them from families with children. That is a very good thing, but there is more that the Government could do to try to bring down food inflation, including getting a sanitary and phytosanitary deal with the EU, which would bring down prices in the shops. We are committed to achieving that this year. It is opposed by the Conservatives and Reform because of their ideological dislike of the European Union, but it is the right thing to do to reduce food inflation for all our constituents.
Esther McVey (Tatton) (Con)
The sad truth is that the Chancellor weakened the UK economy with her tax-busting Budgets and jobs tax, and that has been exposed by this middle east crisis. The Energy Secretary’s actions are making things worse: he has just refused to maximise drilling in the North sea and issue new licences, which would provide much-needed energy security and affordability. Will she now see sense and overrule the Energy Secretary’s decisions?
Rachel Reeves
Since I became Chancellor, we have had six cuts in interest rates, and for every month that I have been Chancellor, wages have risen faster than prices. Compare that with the previous Parliament, where people were worse off at the end than they were at the beginning. If the right hon. Lady believed in energy security so much, why was she part of the Government who refused to fund small modular reactors or Sizewell C and opposed onshore wind, which is the cheapest form of energy? If she believes in energy security, she should back it.
Andrew Cooper (Mid Cheshire) (Lab)
My constituents are being exploited by unscrupulous petrol retailers who are not letting a crisis go to waste. At BP in Winsford unleaded is 10p more per litre than the cheapest price in the area, and at Shell in Middlewich it is 15p more per litre. Does the Competition and Markets Authority have the powers that it needs to clamp down on this unscrupulous behaviour?
Rachel Reeves
We have introduced the cheaper fuel finder to ensure that my hon. Friend and, most crucially, his constituents have that information. People in France can already see the different prices of petrol at different filling stations on a map via an app or their sat-nav. That is where we will be in just a few weeks’ time once we have the technology working with those companies. The previous Government had 14 years to introduce something like that, and other countries have already done so while we went without. Having the fuel finder tool means that all our constituents can fill up at the cheapest cost.
Gavin Robinson (Belfast East) (DUP)
I thank the Chancellor for recognising the disproportionate reliance on home heating oil in Northern Ireland, but the £17 million made available for half a million homes reliant on oil equates to £34 per household, and there is no data to target that support. There is £81 million available from the renewables obligation for electricity. We were told by the Prime Minister and the Northern Ireland Secretary that that could be targeted, yet Treasury officials are blocking that, so I ask her to look at that again.
The Chancellor has made a commitment not to restore the 5p duty on fuel, but could she also look at the rebate for red diesel to help support construction, transport, haulage and energy regeneration in our country to stimulate the parts of our economy that have a disproportionate reliance on it and have lost the support that they gravely need?
Rachel Reeves
I thank the right hon. Gentleman for what he said about heating oil. Obviously, a disproportionate amount of support has gone to Northern Ireland, given its greater reliance on heating oil, and we encourage local authorities to target the money at those who need it most. At the same time, to ensure that everybody is supported, the Competition and Markets Authority is doing an urgent review to make sure that price gouging is not going on. We acted in a matter of days on heating oil, because that was the right thing to do.
When we froze fuel duty, we also took action on red diesel, but I am happy to ensure that the relevant Minister meets with the right hon. Gentleman to talk further about what needs to be done.
Several hon. Members rose—
Rachel Reeves
My hon. Friend is right about the importance of manufacturing in Huddersfield and more widely across Yorkshire. We are introducing the supercharger from the beginning of April, which will take £420 million off the energy bills of the most energy-intensive industries. The British industrial competitiveness scheme will also help over 5,000 businesses when it comes in next year.
Dr Ellie Chowns (North Herefordshire) (Green)
The fuel price shock caused by Trump’s reckless war highlights just how risky it is for the UK to be locked into the global fossil fuel markets. The Climate Change Committee recently pointed out that the cost of achieving net zero by 2050 is less than the cost of a single fossil fuel price spike, reinforcing the point that we need to invest in clean, green technologies and get ourselves off being hooked on fossil fuels.
The key problem in the UK is that gas is coupled to electricity prices, so decoupling is crucial. Will the Chancellor look at the report last week from Common Wealth, which points out that decoupling could be achieved right now and would save households at least £200 each year?
Rachel Reeves
I agree that de-escalation is the best way to reduce bills for families and businesses. I gently say to the hon. Lady that we want investment in renewables, and we introduced the Planning and Infrastructure Act 2025 to make it easier to build them, but her party voted against that—a vote which would have kept people’s bills higher than they need to be. We have had a one-third reduction in gas imports, and gas is setting the price of our energy at something like a third less than it was just four years ago. The electricity generator levy and the energy profits levy are ensuring that excess profits are taxed, and we can use that money to support the public finances and public services.
Justin Madders (Ellesmere Port and Bromborough) (Lab)
The consumer-focused, pragmatic approach being taken by this Government is in such contrast with the rhetoric of some on the Opposition Benches, who would only see military action escalate—and be in no doubt that our constituents would be paying the price for that.
I welcome the CMA’s report this morning about action to tackle rip-off vet fees, but that report took several years. The Chancellor spoke of new powers for the CMA to tackle price gouging, but can she confirm that it will be able to act swiftly, nimbly and in real time to tackle companies seeking to exploit this particular crisis?
Rachel Reeves
My hon. Friend is absolutely right: the Conservative party’s gung-ho approach would have made the crisis worse, not better. Our approach diplomatically has been to de-escalate the crisis at every stage, in part because we do not want that cost of living impact on families. As he knows, we met the Competition and Markets Authority a couple of weeks ago to talk through what more can be done, including on rolling out fuel finder for cheaper fuel and investigating the impact on heating oil. The CMA will be coming back to us in the next few weeks following that investigation, and looking more widely at how to keep prices down for all our constituents.
Simon Hoare (North Dorset) (Con)
The £474,000 awarded to Dorset council last week as part of the Chancellor’s announcement is welcome, but I must tell her that it really will not touch the sides; more will need to be done to support rural communities. Unwillingly and unwittingly, the Government will be profiteering through a massive hike in VAT and duty take. May I urge the Chancellor to ringfence, either in whole or in great part, the excess receipts that she will be receiving—this would not add to Government borrowing—to support rural communities across the country as they face this cost of living crisis?
Rachel Reeves
I thank the hon. Gentleman for what he said about heating oil. As well as the direct support for his local authority and many others, the CMA’s work is crucial to stop businesses exploiting the crisis to increase their profits. As I said in response to my hon. Friend the Member for Ellesmere Port and Bromborough (Justin Madders), the CMA will report on that shortly. On ringfencing certain tax revenues, it is clear that a prolonged conflict will reduce other tax revenues and push up borrowing costs, so it is not possible to ringfence a particular tax for a particular use, because other tax revenues will be coming down. But the whole reason for the energy profits levy and the electricity generator levy is to have some stabilisation in the system to bring in money to support the Government and our constituents when that is most needed. Of course, we will be using it to do that.
Andrew Pakes (Peterborough) (Lab/Co-op)
I thank my right hon. Friend for the serious approach she has taken to the conflict, unlike the hokey-cokey approach we have seen from the Conservative party. Peterborough is willing to play its part in developing our energy infrastructure, and we have already had £1 billion-worth of private investment to upgrade the gas networks based out of Peterborough, but my constituents know that the price hike is not just about what is happening now in the middle east; it is about that decade when we did not build the energy infrastructure the country needs. Will she reassure me that her plan will speed up new nuclear, speed up investment in renewables and get the country building the energy infrastructure we need if we are to tackle this challenge for the long term?
Rachel Reeves
I thank my hon. Friend for that question. It is great to see that investment in the gas networks coming into Peterborough, supported by him. That is in stark contrast to the Conservatives, who got rid of our gas storage facilities, stalled on nuclear and stalled on renewables. As a result, they left us more vulnerable to an energy price shock.
Ben Lake (Ceredigion Preseli) (PC)
What contingency planning is taking place to support non-domestic energy bills, especially in rural areas such as mine where a great number of small businesses and community organisations rely on heating oil and LPG?
Rachel Reeves
I am sure that the hon. Member will agree that the best thing we can do to support households and businesses is to de-escalate the crisis and bring it to an end as quickly as possible. But, as I set out in my statement, I will not tolerate businesses price gouging and earning excessive profits because of the conflict in the middle east. The CMA therefore has new powers to ensure that does not happen, and we are targeting support at those who most need it.