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Kate Forbes: Long-term solutions are needed to ease cost-of-living crisis

Kate Forbes: Long-term solutions are needed to ease cost-of-living crisis
The Finance Secretary said the Chancellor’s new package of measures did not go far enough.

Scotland’s Finance Secretary has “cautiously welcomed” the Chancellor’s £15 billion support package to ease the cost-of-living crisis, but warned a long-term solution is still needed.

Rishi Sunak announced on Thursday that millions of households would receive a £400 energy bill discount – doubling the previous pledge and dropping the requirement for the money to be repaid – as well as a £5 billion windfall tax to be levied on oil and gas giants.

The Chancellor said his plan for a 25% energy profits levy would be coupled with a new incentive, almost doubling the tax relief available on investment.

In a statement on Thursday, Kate Forbes said that households would be “relieved” at the support, which also includes a one-off £650 payment for eight million of the poorest families, a £300 winter payment for pensioners and £150 for people in receipt of disability benefits.

The Chancellor announced the plan on Thursday (Daniel Leal/PA)
The Chancellor announced the plan on Thursday (Daniel Leal/PA)

“Many households will be relieved to see the support belatedly announced today, but we still need a long-term solution to the cost-of-living crisis and reassurance that the UK Government is going to tackle long-term inequalities rather than provide one-off bursts of crisis support,” she said.

Ahead of the announcement, Ms Forbes called on the Chancellor to use all of the £30 billion fiscal headroom to counter the effects of rising prices and inflation.

“Rather than listen to our plea for a comprehensive funding package that fully addresses the unprecedented rise in the cost of living and uses the full £30 billion of fiscal headroom, this piecemeal approach makes it highly likely that more support will be needed later when energy prices rise significantly in the autumn,” she added.

“There is also a severe lack of support for businesses – many of them are still struggling to recover from the pandemic and now face crippling increases in energy costs and the damaging impacts of Brexit on supply chains and the labour market.

“Without urgent economic support there is a real risk that the UK economy is heading for a recession.

Inflation is at its highest levels in 40 years and the UK Government’s failure to fully invest in increasing incomes, tackling inequality and boosting economic competitiveness will only risk pushing households into further debt and poverty.

“The UK Government has almost £30 billion of fiscal headroom, spending only half of this during a cost of living crisis does not go far enough, especially when a further £5 billion from the windfall tax will be raised.”

Ms Forbes said the oil and gas levy was “a start” but meant that Scottish industry would be “carrying the weight of UK-wide interventions”.

Meanwhile, Deirdre Michie, the chief executive of oil and gas body Offshore Energies UK, hit out at the windfall tax.

“This is a disappointing and worrying development for industry, the shockwaves of which will be felt in offshore energy jobs and communities, and by consumers, for years to come,” she said.

“In April, we welcomed the Government’s British Energy Security Strategy, which pledged secure, clean and affordable British energy for the long term.

“We thought long-term meant years or decades, but it seems to have meant just a few weeks.”

Ryan Crighton, the policy director at Aberdeen and Grampian Chamber of Commerce, said the tax would “deter investment” in the North Sea.

“(The tax) needlessly puts obstacles in our path to net zero and will increase our reliance on imported energy, which comes at a greater environmental and financial cost,” he added.

Chancellor Rishi Sunak said: “I know that people in Scotland are anxious about keeping up with rising energy bills, which is why today we have introduced measures which will take the support for millions of the lowest income households over £1,000.

“As a nation we have a responsibility to help the most vulnerable, which is why this support is mostly targeted at people on low incomes, pensioners and disabled people.

“But we understand that all households in Scotland will be concerned about the rise in energy costs this autumn, so every household is set to get £400 off their energy bills from October, with no repayments necessary.

“It is right that companies making extraordinary windfall profits from rising energy prices should contribute, and I’m introducing a temporary energy profits levy to help pay for this support, while still encouraging the investment that generates jobs in Scotland.”