Contribution
I thank the Chancellor for advance sight of her statement and add the Opposition’s firm support for our armed forces.
As the Chancellor has made clear, these are very serious and concerning times, and developments in the middle east are already having profound consequences for our economy. Oil prices have surged above $100 a barrel for the first time since the 2022 energy crisis. That alone is enough to have huge knock-on effects for households and businesses: families filling up their car will already have noticed petrol prices increasing, and fixed-price energy tariffs have either been increased or pulled from the market. We are already seeing British households worse off as a result of this conflict.
I am grateful to the Chancellor for updating the House on her meetings with other G7 Finance Ministers, and I welcome her commitment to supporting action to ease pressure on global supply by using strategic oil reserves. That, however, will go only so far.
As the Chancellor has said, the longer this conflict continues, the more likely it is that we will see a sustained period of higher prices. That, in turn, will have implications for interest rates and our cost of borrowing. The longer that lasts, the more likely it is that higher inflationary expectations will become anchored. If that happens, monetary policy will need to adjust accordingly, which may mean higher mortgages for homeowners who have only just begun to see some relief.
Gilt markets have already been responding to these events, which could mean that the forecasts we were given just last week from the Office for Budget Responsibility end up looking very different. We must continue to monitor developments closely.
Where the Opposition clearly differ from the right hon. Lady is in her approach to the economy in the run-up to this crisis, as her gross mismanagement has left us far more vulnerable than would otherwise have been the case. She refers to inflation, which was bang on target when we left office; thanks to her choices, though, it rose back up to almost 4% last year—the highest in the G7—and remains elevated, which is far from ideal given the threat of a significant further spike in energy prices. Extraordinarily, the Chancellor has just now reconfirmed that the Government will press ahead with a rise in fuel duty later this year.
Borrowing is running higher than was forecast when the Government took office—we are spending well over £100 billion a year on debt interest alone. This leaves us far more vulnerable to rising borrowing costs. The Government are also continuing to impose ruinously high taxes on our oil and gas sector and choosing to rely on imports instead of maximising our own domestic energy supply. That is proving to be an incredibly short-sighted approach. However, as the right hon. Lady has just told us, there will be no change in direction. That is the wrong choice. More broadly, of course, business confidence has hit record lows, and unemployment has risen back to pandemic levels. Our economy is weaker as a direct result of this Chancellor.
Last week, at the spring statement, the right hon. Lady had an opportunity to change course; instead, we got no action at all, just breathtaking self-congratulation and denial. She had a vital opportunity to come to the House with a plan to get the economy growing, but she did not do so—not least because this weak Government have caved in to their own Back Benchers, who prefer higher welfare spending to fixing our economy.
Today, let me reiterate our offer to support the Government if—even at this late stage, and particularly given the gravity of the current global outlook—they do the right thing by showing some backbone and coming forward with a proper plan to cut welfare spending and strengthen our economy so that we can properly support hard-working families through this difficult time. That is the very least that the British people deserve.
Finally, let me ask the right hon. Lady the following questions. Will she urgently reconsider her decision to implement the first increase in fuel duty in 15 years? Likewise, will she urgently reconsider her decision to continue with the crippling taxes being imposed on North sea oil and gas producers? On the Fingleton review on nuclear, can she clarify whether the Government are accepting all the recommendations, as Ministers previously committed to accepting?
Will the right hon. Lady give further details on what additional economic action is under consideration internationally if the conflict continues? What measures are the Government considering to support households in the event of a sustained period of higher prices, and what action is being considered as part of the Financial Secretary to the Treasury’s work to support those reliant on heating oil?
Are the Government tracking the Iranian regime’s illegal funding sources to ensure that UK financial systems are not facilitating funds that are being used to support repression? Will the right hon. Lady confirm that there is sufficient resource available in the special reserve so that our brave servicemen and women have the support that they deserve?