Rishi Sunak has ruled out slashing VAT on household energy bills in Wednesday’s Budget, in a blow to millions of families struggling with a cost of living squeeze.

Treasury has been resisting the pressure on the Chancellor to reduce its levy. Sources claimed that he believed that the move would subsidise the wealther households, while doing too little for those who are the most vulnerable. 

The current VAT rate of 5 per cent on fuel bills sets households back by around £60 a year, and scrapping it would cost the Treasury around £1.6billion. 

Labour’s Shadow Chancellor Rachel Reeves called on ministers to deliver on a promise they made during the 2016 Brexit referendum campaign, when Boris Johnson and Michael Gove pledged to scrap VAT on energy bills if the UK left the European Union.

They wrote jointly in an article at the time that: “When we vote Leave, we will have the ability to repeal this unfair and harmful tax. It’s not right that Brussels’ unelected bureaucrats impose taxes on the poorest of British politicians.

Miss Reeves stated in an interview with Mail that “they said it in referendum campaign so why hasn’t they done it?” What more evidence are you looking for to cut domestic VAT energy bills? It is the perfect time to do so, since they are so high. The best thing about cutting VAT is that it can be done instantly and automatically on your bills. People don’t need to apply, there is no bureaucracy and everyone is affected by rising gas electric bills.

However, Mr Sunak did promise that the UK’s minimum wage will increase from £8.91 to £9.50 an hour next year – an inflation-busting rise of 59p which is expected to deliver an annual salary boost of an extra £1,000 to millions of full-time workers. 

A total of 5.6 million staff, including teachers and members the Armed Forces, will see an increase in their salaries starting April after a one-year salary freeze. At the same time, the minimum wage will rise by 59p to £9.50, boosting the incomes of two million of the lowest paid.

But the move has sparked a backlash from campaigners demanding to know where the money would come from, with the country facing an estimated £400billion bill for the Covid crisis and the Treasury having already made spending pledges worth billions.  

It comes as Mr Sunak has been forced to ditch a 2.84p budget hike in fuel duty because of record petrol prices, with the average forecourt price per litre hitting a record 142.94p on Sunday. 

The hated levy was due to go up from 57.95p per litre to 60.79p, potentially costing drivers £66 extra a year per car. MPs claim that they have been assured by Treasury that the planned 4.9 per cent increase for 2022 will not be implemented.  

It is: 

  • Mr Sunak ruled out slashing VAT on household energy bills – but was urged to think again to ease the pressure on struggling households;
  • As the average pump price soared to an all-time high, petrol companies were accused of ripping motorists with the extension of the fuel duty freeze.
  • Despite billions of pounds of new spending, ministers failed to set a goal for clearing the huge NHS backlog.
  • Critics accused the Chancellor, by delaying plans for overhauling business rates, of driving a “nail in their coffin” on high streets.
  • The Commons Speaker berated Mr Sunak for giving a lot of details in preparation for tomorrow’s Budget.
  • Rachel Reeves from Labour warned voters that they would face record taxes and not receive better services.
  • Experts warned that pay hikes could be ‘blunted by rising inflation, rising oil bills, and the cost of living crisis.
Rishi Sunak has ruled out slashing VAT on household energy bills in Wednesday's Budget, in a blow to millions of families already struggling with a cost of living squeeze

Rishi Sunak has ruled against slashing VAT household energy bills in Wednesday’s budget, in a blow for millions of families already struggling to cope with a high cost of living

Research agency Cornwall Insight has predicted suppliers could push the energy price cap to about £1,660 in summer. The forecast is approximately 30% higher than the record £1,277 price cap set for winter 2021-22, which commenced at the start of October. It was £1,138 before that

Research agency Cornwall Insight has predicted suppliers could push the energy price cap to about £1,660 in summer. The forecast is approximately 30% higher than the record £1,277 price cap set for winter 2021-22, which commenced at the start of October. It was £1,138 before that 

Although the Chancellor has been under immense pressure to reduce the levy, Treasury sources stated that he believed the move would subsist well-off households while not doing too much for the poorest (stock photo).

In cash terms, public sector pay has risen more steadily than private sector pay, which has seen significant dips during the pandemic and the Credit Crunch. The different types of jobs in each sector means that the overall pay level is not directly comparable in this chart

Cash terms, the pay in the public sector has increased more steadily than that in the private sector. Private sector pay has seen significant drops during the pandemic or the Credit Crunch. This chart is not comparable due to the different types of jobs in each industry.

This NIESR chart shows percentage growth in wages in each sector over time. Private sector workers were hit harder by the pandemic and many will have gone without a pay rise last year, but wage growth is recovering this year as the economy bounces back

This NIESR chart shows the percentage growth in wages over time. Private sector workers were harder hit by the pandemic. Many will have gone without a raise last ye, but wage growth has begun to recover this year as the economy bounces.

The Government’s prebudget spending spree 

The Government has already announced spending worth more than £30billion which Rishi Sunak will confirm at the Budget on Wednesday. 

Here is a list of some of the most prominent funding pledges: 

– The national minimum wage will increase from £8.91 to £9.50 from April next year. 

– An extra £6billion will be given to the NHS to pay for new equipment and new facilities to clear the Covid backlog.

– Brownfield sites covering the equivalent of 2,000 football pitches could be turned into plots for housing as part of a £1.8billion injection.

– A £2.6billion pot of funding will be set up to help children with special educational needs and disabilities. 

– Levelling up transport outside of London will benefit to the tune of nearly £7billion, paying for a range of Projects, including tram improvements. 

– The Department of Health and Social Care will receive £5billion over the next three years to fund research and development in areas such as genome sequencing and tackling health inequalities. 

– A cash injection of £3billion will be given to both post-16 education but also to adults later in life. 

– £850million will be spent over three years to ‘breathe life’ back into cultural hotspots like London’s V&A museum, Tate Liverpool and the Imperial War Museum in Duxford.   

– Ageing Border Force vessels will be replaced by new cutters as part of a £700million investment to improve the safety of Britain’s borders. 

Business leaders warned that the minimum wage increase could cause financial difficulties for struggling businesses and raise inflationary concerns.

Combining the unfreezing of public sector pay with an increase in the minimum wage would give a salary boost to nearly five million workers. However, higher wages mean higher costs for employers. This could lead to price increases and further inflation.  

Critics warn that it would be unfair to ask the private sector for funding to pay for a salary increase in the public sector, given the ‘unfair’ nature of the situation.The pandemic caused extreme economic pain.  

Miss Reeves accused ministers for wasting billions upon billions of public money in the past two-years. She highlighted examples including £438million paid to consultants working on test and trace at rates of up to £6,600 a day.

She stated that the Government is now asking ordinary workers and businesses to pay more national insuring. “But they’ve been wasting taxpayers money and not showing the respect that I believe it deserves.”

“It is a lack understanding about how families and pensioners are dealing with rising costs right now. Ministers may not be able to fully grasp the difficult decisions that families are facing and the businesses that are making them.

Miss Reeves shared the story of her 67-year old mother, who was having difficulty seeing a GP face-to-face. She stated that people are being taxed more now than ever since the Second World War Two.

“Do people feel they are getting better service than at any time since the Second World War?” Talking to my family and constituents, I can tell that this is not the way people feel.

‘I spoke with my mum over the weekend about how long it takes for her to see a GP in person or get routine tests. It’s the same story for many people. You wait in line for hours to speak to someone on the phone, and then you’re waiting for appointments for a few weeks.

“Or you can look at the schools in my area and see what’s happening to class sizes. So people are being asked to pay more than they’ve ever been asked to pay before and yet public services – despite I think how hard a lot of people that work in the public sector – are getting worse.’

According to Treasury sources Sunak believes that a reduction to VAT on household energy bills is not possible because it would be ‘poorly targeted and lead to subsidizing thousands of well-off families and not providing enough support to those who need it most’.

Household bills have increased since the energy price cap was lifted this month and lower tariffs were withdrawn. Families on a standard tariff with typical energy usage have seen their bill rise by £139 to £1,277 a year. 

Labour claims it would reduce the VAT on energy bills by ZERO for six month 

Shadow chancellor Rachel Reeves stated that Labour would reduce the VAT rate on gas and electricity bills by 5% to 0 for six month.

She stated to Times Radio, “There is a real opportunity now that the Prime Minister and Chancellor can put their money where there mouth is. At the moment when many families are facing an incredibly difficult winter with many pensioners feeling the pinch with the rising prices of essentials like food and gas, and electricity, that the Government could do some immediate action to reduce bills. That is cutting VAT from 5% up to 0%.

“And we would have to pay for it, and I’ve been looking over VAT receipts over these past few months.

‘VAT receipts have come in £2.2 billion more than what was anticipated and forecast at the last Budget, in a large part because prices have gone up by so much more than anticipated, that money could be used to immediately and automatically reduce the gas and electricity bills of every family, pensioner and individual in this country who is worried about rising gas and electricity prices right now, it’s a practical thing that Government could do.’  

Yesterday, the Commons Speaker criticized Mr Sunak for giving so much information about the Budget in the days leading up to its publication. Sir Lindsay Hoyle claimed that past chancellors would have resigned because they ‘ride roughshod’ over parliament’s expectation of being informed first.

Although the economic statement will not be delivered until tomorrow, 16 measures have already been disclosed by the Treasury. Yesterday Mr Sunak’s department briefed that there would be almost £6billion for the NHS.

Sir Lindsay stated that he had repeatedly stressed, including last Thursday, that ministers must first make important announcements to the chamber. Despite these clear statements, it’s evident the Treasury briefed journalists about the contents of the forthcoming budget over weekend. 

Monday’s Official Spokesman for the Prime Minister hinted at Mr Sunak cutting fuel duty. “We acknowledge that rising fuel costs pose a challenge for the British people.” 

According to the RAC, retailers have seen their profit margins increase by 4p per liter from 5.5p in April 2013 to 8.59p in April 2014. They claimed that smaller, independent retailers were trying to rebuild profits following the sharp fall in sales caused by the UK lockdown. 

According to the AA, record pump prices are telling drivers that it’s time for them to switch to electric, regardless of whether they’re oil producers, market speculators or Treasury taxes.  

Political pressure has been immense on the Chancellor to not raise fuel duty. Numerous Tory MPs from the Northern Research Group wrote to him, saying that North residents rely on cars to get to work, take their children to school, as well as to provide food for their families.

“Any rise in fuel duties puts a bar in the way people access well-paying jobs, and take care of their families. Cars for our constituents don’t come as a luxury, but they are a necessity. 

The new national minimum wage of £9.50 will be rolled out from April 1 and will apply to all workers aged 23 and over.

The minimum wage for younger workers will also increase, with people aged 21 to 22 seeing their pay go from £8.36 to £9.18. Pay for apprentices will increase from £4.30 to £4.81.     

Mr Sunak stated that ‘This Government is on the side for working people. This wage boost ensures that we are making work pay and keeps our sights on achieving our target of ending low pay by end of this Parliament.

The Government has established a minimum wage target of two-thirds the average earnings by 2024.  

The Chancellor said that as furlough had ended a return to 'a more normal way of doing things' was needed.

The Chancellor stated that furlough was over and that it was time to return to “a more normal way of doing business”.

Sajid Javid hailed Rishi Sunak's £6billion funding boost for the NHS as he insisted the cash is 'new money'

Sajid Javid hailed Rishi Sunak’s £6billion funding boost for the NHS as he insisted the cash is ‘new money’

Sajid Javid hails £6billion funding boost for the NHS to clear Covid backlog as a ‘huge amount’ of cash as he insists Rishi Sunak’s Budget spending spree for the health service is ‘new money’ 

Sajid Javid today hailed Rishi Sunak’s £6billion funding boost for the NHS as he insisted the cash is ‘new money’.

The Health Secretary stated that the Chancellor’s Wednesday Budget presentation of a ‘huge sum’ of money was what the health service had ‘asked for’.

He said it would be enough to clear the coronavirus treatment lag, with funding to be used on millions more scans, checks, and procedures for non-emergency patient.

The £6billion package is for capital spending and is separate to the £12billion funding injection being provided through the Government’s new health and social care levy which will pay for day-to-day services.

The capital funding will be used to support approximately 30% more elective activity in 2024-25 than it did before the pandemic.

In an effort to address the Covid backlog of people waiting for checks, tests and scans, and help get waiting lists down, £2.3billion of the funding package will be used to transform diagnostic services.

According to the Treasury, there will be at most 100 community diagnostic centres in England that can be accessed from one location. This includes 44 already announced.

These centres will be able to clear the majority of test backlogs due to the pandemic, including CT, MRI, and ultrasound scans by the end the parliament.

The settlement to tackle backlogs also includes £1.5 billion for increased bed capacity, equipment and new surgical hubs to tackle waiting times for elective surgeries.

Each hub will have four to five operating theatres that can be used for elective surgery.

Labour called the increase underwhelming’ and stated that’much’ will be’swallowed away’ by Government tax hikes. 

Bridget Phillipson, shadow chief secretary to the Treasury, said: ‘This underwhelming offer works out at £1,000 a year less than Labour’s existing plans for a minimum wage of at least £10 per hour for people working full-time. 

“Much of it” will be swallowed by the Government’s tax increases, universal credit cuts, and failure to control energy bills. It’s clear that Labour has the only party committed to improving the prospects of workers.

The increase puts the minimum wage on course to hit £10 an hour before the 2024 general election.  Boris Johnson’s claims to shift the UK towards a high-wage and high-skilled economy would be strengthened if the minimum wage was raised and public sector wages were unfrozen. 

Based on the advice provided to the Government by the Low Pay Commission, the minimum wages are set.

The Treasury stated that it had accepted all recommendations of the Low Pay Commission this fiscal year.

While employees are likely to welcome the increase in minimum wage, there are concerns from the Treasury about the impact it will have upon businesses.  

Employers will pay more for higher wages, which could cause them to raise their prices. 

Any increase in prices will likely increase the chances of Bank of England raising rates.

It was made amid backlash over claims that Sunak would use Budget to unfreeze pay in the public sector.  

John O’Connell, chief executive of the TaxPayers’ Alliance campaign group, said it would be ‘unfair’ to ask the private sector to pay for a public sector pay rise after the damage done by the pandemic. 

He stated that the public sector’s pay creeping up would be a problem for the rest of the country, while millions in the private sector are experiencing extraordinary economic pain.

“Many were affected by the pandemic and their lives, businesses, and livelihoods were destroyed. It’s unfair that these same people should have to pay for public sector jobs that are protected. 

“The government should help all taxpayers by reducing the 70-year high tax burden.”  

Julian Jessop was an economist fellow at the Institute of Economic Affairs think-tank.The public sector pay freeze seems to have been successful in reducing average weekly earnings. Private sector earnings now match those in public. 

“It is becoming increasingly difficult to justify keeping the freeze, when wages and prices are rising rapidly in the rest of our economy. The government must pay the current rate, just like any other employer.

“Despite this, workers in government are still paid more than those in private sector after taking into account all factors, including pensions.

“What’s more is that the economic effects of the pandemic have been felt by the private sector workers in terms of job loss and pay cuts. 

No sugar tax, then? Sunak reveals that his preBudget prep includes Twix and Sprite

Rishi Sunak has revealed that his “pre-game” routine will consist of a Twix, Sprite, and a can before delivering his Budget.

The Chancellor, who admits to having a sugar problem and has stated that he is addicted to total coke, was asked by Times Radio whether he has any rituals or superstitions in advance of the event.

He stated that he had a pre-match and general routine for when I have to do parliamentary tasks.

“But I have a Twix, and a can Sprite which Lisa, who runs my office, always makes sure is sitting on my desk at Parliament. So that is my immediate pregame booster.”

Mr Sunak also stated that his children have a lot of input on tie selection, and that he sometimes wears bracelets they make.

He stated, “So that’s the general superstition, and tradition, but they are all here in Yorkshire for half term, so I’m not sure how I’m going to manage all that. We’ll have it on Zoom in the morning probably.

The Chancellor has spoken out before about his love of Peloton, a stationary exercise bicycle with a digital display. He was asked if he would be willing to ride 6am before the big event.

He said, “Probably not. My routine for the last week has been somewhat slowed down in preparation for Wednesday’s event.

“This suggests that public sector salaries should still be increased slowly than private sector wages, even after the freeze has ended.”

During an interview on BBC’s Andrew Marr Show, Mr Sunak hinted at changes in the pay front. 

Asked if public sector pay will increase, he replied: ‘That will be one of the things that we talk about next week in the spending review.

“Obviously, over the past year we made a decision to have more targeted approach to public sectors pay since there were large increases in the previous year and the private sector saw pay decreases last fiscal year. People were also on furlough.

“We thought it was reasonable and fair. We’ll now have to establish a new pay policy, and that will be the topic of next week’s spending review.

Rising inflation is putting pressure on the Government, who must act on wages. 

According to figures released by the Office for National Statistics, the Consumer Prices Index was at 3.1% in September according to statistics. 

This figure is well above the Bank of England target of 2 percent. 

In September, the Bank warned that inflation could rise to over 4% before falling back as the economy recovers from the pandemic.    

The Government announced last November at the 2020 Spending Review that it was ‘pausing’ public sector pay until 2021/22, but an exemption was made for NHS staff. 

The Coalition Government frozen public sector pay for two years beginning in 2011/12. 

The average increase in public sector salaries from 2013/14 through 2017/18 was 1%.

This policy was lifted in 2017, and parts of the public sector saw increases above 2 percent from 2018/19 to 2020/21.

In April 2020 average weekly earnings in the public sector were £647 compared to £567 in the private sector, according to research published by the House of Commons Library.  

April 2020 earnings for public sector workers were 2.4% more than in the previous year. However, the private sector saw a 0.6% drop in pay. 

The coronavirus pandemic caused the fall in the private industry. This saw industries such as hospitality being locked down.     


Sunday’s announcement by Rishi Sunak, Chancellor, stated that ‘(over] the last year I’ve been focused delivering our plan to jobs, protecting peoples livelihoods and their incomes. Their jobs’.

He stated that he would now be focusing on the future and building a stronger British economy.

These are the announcements already confirmed:

– ‘Levelling up’ transport

The Treasury said nearly £7billion would be given to areas such as Greater Manchester, the West Midlands and South Yorkshire for projects ranging from tram improvements to introducing London-style improvements in infrastructure, fares and services.

Some £5.7billion will be five-year transport settlements for the regions, while £1.2billion of new funding will go towards transforming bus services to deliver London-style journey times, fares and number of services.

– Digital overhaul for NHS

A £6billion package of funding will help tackle NHS backlogs and invest in technology and data in a bid to improve efficiency and security within the health service.

The Treasury said the £5.9billion funding is on top of the Government’s plan to spend £8 billion to tackle the elective backlog over the next three years, and the £97 billion additional funding the Government has provided to support health and care since the start of the pandemic.

– Health research and Development

The Department of Health and Social Care will receive £5billion over the next three years to fund research and development in areas such as genome sequencing and tackling health inequalities.

Genome technology will be part of the package. This technology allows doctors to detect more than 200 conditions in babies compared to existing tests that can only identify nine.

Some £95million of the funding will go towards the Office for Life Sciences to help with cutting-edge innovations to help treat cancer, obesity and mental ill health.

– A ‘skills revolution’

A cash injection of £3billion will be given to both post-16 education but also to adults later in life.

Mr Sunak will announce that the number of skills bootcamps in areas such as cybersecurity, artificial intelligence, and nuclear will quadruple.

Some £1.6 billion will provide up to 100,000 16 to 19-year-olds studying for T-levels – technical-based qualifications – with additional classroom hours, while 24,000 traineeships will also be created.

– Triple funding for special educational needs or disabilities

New school places for children with disabilities and special educational needs will be created with a £2.6billion pot.

Mr Sunak is expected almost to triple this year’s capital funding for the most vulnerable young people through specialised education support. Up to 30,000 spots will be made available.

– Housing on brownfields

The Treasury said a £1.8billion package of investment would help regenerate land and level up the country.

Mr Sunak will allocate £65million to ramp up England’s planning system, including digitisation that will make local plans easier to access and £9million to help local authorities create 100 new urban ‘pocket parks’ across UK.

– Global Britain Investment Fund

The £1.4billion fund will funnel money into key innovative sectors by handing out grants to encourage internationally mobile companies to invest in the UK’s critical industries, including life sciences and automotive.

The fund includes £354million to support investment in life sciences manufacturing, increasing resilience for future pandemics, and more than £800million investment in the production and supply chain of electric vehicles, including in the North East and Midlands.

A new talent network will be created to attract high-skilled workers into the UK. It will be located in innovation hotspots in the Bay Area of San Francisco, Boston in the USA, and Bengaluru in India.

– Museums and galleries get a boost

Over three years, £850million will ‘breathe life’ back into cultural hotspots. The money will be used to restore and upgrade some of the country’s most popular institutions such as London’s V&A museum, Tate Liverpool and the Imperial War Museum in Duxford.

A total of £125million will go towards helping build a state-of-the-art scientific research centre in Oxfordshire, part of the Natural History Museum.

In addition, more than £75million will be spent to help 110 regional museums and libraries improve their buildings and level up their digital facilities, the Treasury said.

Protection at the border

Ageing Border Force vessels will be replaced by new cutters as part of a £700million investment to improve the safety of Britain’s borders.

The current fleet, which is 20 years old, will be retired and 11 new vessels will come into service to help tackle organised crime and illegal migration at a cost of £74million.

The announcement also includes £628million ‘to modernise and digitalise the border’, with proposals including a US-style Electronic Travel Authorisation for tourists wishing to come to the UK.

– Emma Raducanu’s next challenge

Football pitches, tennis courts and youth facilities will see £700million of funding to help foster the next generation of young talent.

Coaching in Maths

Up to 500,000 adults will be able to access a £560million scheme to improve their maths skills, as it was revealed more than eight million people in England have numeracy skills lower than those expected of a nine-year-old, with the North East, West Midlands and Yorkshire and the Humber worst affected.

Mr Sunak will explain that people can access free tutoring, digital training, and flexible courses through the Multiply program.

The new Sure Start?

The Chancellor will announce a range of investments to give children the ‘best possible start in life’ totalling £500million towards support for families and children, including new family hubs.

Labour has criticized the plans and said that it was a mistake for Sure Start centres to close, which provided similar services.

Mr Sunak claimed that the new scheme was unique.

– Crime prevention

A £435million package of measures aimed at preventing crime will form part of next week’s Budget – with a focus on violent offences against women.

The Chancellor is expected to pledge millions for better CCTV and improved street lighting and give £80million in additional funding to the Crown Prosecution Service.

The Treasury stated that a portion of this funding will be used to “improve the response to sexual assault and rape cases”.

– Dragons’ Den-style investors

Angel investors will be available to businesses outside London and the South East.

A £150million pot of funding for the British Business Bank will encourage the development of regional networks of Dragons’ Den-style angel investors to help make people’s dreams of starting a business a reality.

– Cutting-edge treatment available for veterans

Veterans may be eligible for research grants that allow them to perform innovative surgery, which allows artificial limbs and bones to be permanently attached to their bones.

Some £5million will be put towards a new UK-wide Veterans’ Health Innovation Fund at the Budget and spending review on Wednesday.

The fund would be able grant research grants to support the development of new surgical techniques and treatment options.

– Post-Brexit tax rule changes

To attract more of the world’s biggest shipping companies to the UK, tax changes will be made.

If the UK has a tonnage tax regime, ships that fly the Union Jack or those that help the UK reach net zero are more likely to be accepted.

On Wednesday, Mr Sunak’s Budget and Spending Review will be presented to the Commons.