UK clarifies foreign, domestic response to cost of living crisis
Monday, March 14, 2022
Wikinews received clarification earlier this month from the United Kingdom Department for Business, Energy and Industrial Strategy (BEIS) regarding the government’s response to the cost of living crisis following the Russian invasion of Ukraine.
The UK anticipated Russian action against Ukraine for several months, and has coordinated a response with NATO and the European Union. Many “swift retributive responses including an unprecedented package of sanctions” promised in January were imposed after the Russian invasion began in February.
They now include “financial, trade, aircraft, shipping and immigration sanctions” to urge Russia “to cease actions which destabilise Ukraine, or undermine or threaten the territorial integrity, sovereignty or independence of Ukraine.” Most recently, it includes a commitment made by Business Secretary Kwasi Kwarteng Tuesday to phase out Russian oil and natural gas in the UK by the end of the year.
The announcement came the same day United States President Joe Biden announced a ban on imports of Russian oil, coal and gas.
However, a UK government spokesperson told Wikinews: “We cannot have a cliff-edge where oil and gas are abandoned overnight. Turning off the taps would put energy security, British jobs and industries at risk and we would be even more dependent on foreign imports.”
The European Commission was more cautious, planning to cut Union dependence on Russian imports by two-thirds this year, before ceasing altogether “well before 2030”. But whereas Russia supplies 40% of the EU’s natural gas, much of the UK’s energy is produced domestically.
The spokesperson contrasted the British situation with that of the EU: “Our single largest source of gas is from the UK Continental Shelf and the vast majority of imports come from reliable suppliers such as Norway.
“There are no gas pipelines directly linking the UK with Russia. Imports from Russia made up less than 4% of total UK gas supply in 2021.
“Ministers and officials continue to engage constructively and regularly with energy intensive industries and our priority is to ensure costs are managed and supplies of energy are maintained.”
A government FAQ published February 25 adds the UK has three liquefied natural gas (LNG) terminals, while Germany has none. The fact sheet urged “European countries on the continent reduce their reliance on Russian gas both through alternative supplies, including the global [LNG] market”.
A press release from Tuesday specifically named Vladimir Putin, Russia’s president, and called the invasion “illegal”. The spokesperson said: “We continue to monitor the impacts that Putin’s unprovoked invasion of Ukraine is having on the cost of living in the UK, so we keep our approach under review.”
The release asserted Russian oil “is already being ostracised by the market”. And in any case: “In a competitive global market for oil and petroleum products, demand can be met by alternative suppliers. We will work closely with international partners to ensure alternative supplies of fuel products.”
But high inflation, already associated with the rising cost of petrol, has seen prices rise in all key areas. Before the Russian invasion, the Bank of England forecast inflation to rise to about 7% in spring, from 5.4% last year. And economists cited by The Guardian reportedly project inflation to rise to almost 8% next month.
Consultancy firm The Centre for Economics and Business Research more than halved its growth expectations for 2022 from 4.2% to 1.9% Tuesday. The Institute for Fiscal Studies (IFS) has said the £9 billion package by Chancellor of the Exchequer Rishi Sunak “would now offset only about one fifth of the rise in household energy bills.”
The government spokesperson said: “We recognise the concerns people have about the cost of living, which is why we have set out a generous package of support worth around £21bn including a £150 council tax rebate from April and a further £200 energy bill discount in October – cutting energy bills quickly for the majority of households.”
They added: “We are already providing support to families worth around £20 [billion] this financial year and next, including cutting the Universal Credit taper to make sure work pays, freezing alcohol and fuel duties to keep costs down, and providing £9.1bn to support 27 million households with their energy bills.”
As hinted, all measures were introduced prior to the Russian invasion of Ukraine, which began on February 24.
On February 3, it was announced those in England in Council Tax bands A-D would get £150 off their council tax payments. It was also announced there would be a £200 discount on all Britons’ energy bills in autumn. The £200 would be repaid automatically over the next five years, which Leader of the Opposition Sir Keir Starmer likened to a loan.
During Prime Minister’s Questions (PMQs) Wednesday, he derided Sunak for proposing “a forced £200 loan for every household paid back in mandatory instalments”.
Prime Minister Boris Johnson defended the government for their £20 billion support package, calling the measures “unprecedented”. He added he plans to set “out an energy independence plan for this country in the course of the next few days to ensure that we undo some of the damage of previous decisions taken”.
Sunak announced changes to Universal Credit and the continued freeze of fuel levies during his autumn budget statement on October 27. The amount withheld workers making above the worker allowance threshold per pound was reduced from 63 pence to 55 pence. It follows the UK government’s cancellation of a Covid-19 uplift of £20 per week to Universal Credit in early October, which cut the income of six million claimants by £1040 per annum.
The fuel duty was frozen twelve years ago and has not been lifted since. It is estimated to save motorists £1900.
The statement also included a “radical simplification” of alcohol duties, reducing the taxable bands from fifteen to six and suspending a planned hike at a £3 billion loss to HM Treasury. This was encouraged by many organisations, including the British Beer and Pub Association.
Even so, the measures have been criticised as too meagre to address the reality of the situation. Ahead of Sunak’s spring statement slated for March 23, Conservative MPs have pressured the Chancellor to consider new measures. A source reportedly told The Guardian officials in HM Treasury are weighing options; publicly, they state “There’s only so much that can be done, and we’ve never seen oil prices where they are now.”
Analysts warned Britons from February 24 household gas and electricity bills could reach £3000 per year. The Office of Gas and Electricity Markets announced it would lift a cap on default energy tariffs by 54% to £1971 from April.
Though oil prices stabilised to below USD120 per barrel Wednesday, Brent Crude briefly reached a 2008 high of $147.50 per barrel and remain substantially higher from before the Russian invasion. To minimise the effect this will have on British consumers, Sir Keir pushed for nuclear power, renewable energy and home insulation at PMQs.
Johnson defended his record on renewables, calling the UK “the Saudi Arabia of wind power”. The UK spokesperson told Wikinews “It’s the right thing to do to move away from dependence on Russian oil and gas across Europe and this means looking at more nuclear and much more use of renewable energy.”
However: “Companies and skilled employees right across the UK’s gas sector are working to maximise production through this winter, helped by several small new wells and fields that have come online in recent months and edged production up.” The example Wikinews raised over the Abigail oil field in the North Sea, which was greenlit for development by an Israeli firm on February 2, was not addressed. At the time, the director of the Oil and Gas Authority told Sky News oil and gas will remain a source of British energy for decades.
The government spokesperson continued: “The issues we are facing are a result of high international gas prices rather than supply, and further UK oil and gas licensing is unlikely to have a major impact in the short term.”
The Labour Party has urged a windfall profits tax to be imposed on excess profits made by major fossil fuel companies, including BP and Shell plc. Both companies reported historic profits for 2021 in February. BP saw profits of $12.8 billion from -$5.7 billion in 2020, and Shell $19.3 billion from $4.85 billion in 2020.
After BP’s announcement, Shadow Chancellor of the Exchequer Rachel Reeves tweeted “The chancellor’s energy plans last week left families more worried than ever. It’s time for Labour’s plan for a one-off windfall tax on oil and gas producers to cut bills.” However, when pressed at PMQs, Johnson urged a “a sober, responsible approach.”. He said: “The net result of [a windfall tax] would be to see the oil companies put their prices up yet higher, and make it more difficult for them to [divest] from dependence on Russian oil and gas.”
The UK government spokesperson told Wikinews: “A windfall tax could deter £14 billion worth of opportunities awaiting investment, which would risk both security of our energy supply, as well as almost 200,000 jobs that rely on the industry.
“Oil and gas companies in the North Sea are already subject to a tax rate on their profits that is more than double those paid by other businesses. To date, the sector has contributed more than £375 billion in production taxes.
“We keep all taxes under review but we do not comment on speculation about tax changes.
“The UK Government places additional taxes on the extraction of oil and gas, with companies engaged in the production of oil and gas on the UK Continental Shelf subject to headline tax rates on their profits that are currently more than double those paid by other businesses. To date, the sector has paid more than £375 billion in production taxes.”
The government is also criticised for its plan to retrofit homes with poor insulation. In March last year, the government’s flagship green homes grant was scrapped, having only installed 5800 energy efficiency measures.
The government spokesperson responded: “We are investing almost £6.6 billion to support the installation of energy efficiency measures in low energy performance homes including older properties with low income home owners and tenants.
“The Heat and Buildings Strategy set out a comprehensive package of measures we are taking to kickstart the transition to low-carbon heat and build the market for heat pumps. This includes investment in a new £450 [million] Boiler Upgrade Scheme, the £950 [million] Home Upgrade Grant and the £60 [million] Heat Pump Ready research programme.”