Poorest households face biggest UK hit from Russia sanctions, cross-party MPs warn Rishi Sunak

A new report by the Treasury Committee, whose members include Thirsk and Malton’s Conservative MP Kevin Hollinrake and Labour MP for Hull West and Hessle Emma Hardy, has said the consequences of sanctions are “most definitely a cost worth bearing in order to aid Ukraine in opposing Russian aggression” and are pushing Russia towards “economic catastrophe”.

But it added: “However, that cost, combined with the already present pressures in the UK on the cost of living, will impact the whole country, and will be felt particularly by low income households. As the Government moves forward with its sanctions strategy, it must take further action to support UK households - in particular those on lower incomes - to manage the subsequent rise in energy and other costs.”

Government borrowing is currently £26bn lower than had been forecast for the financial year due to stronger than expected tax revenue.

Mel Stride, chair of the Treasury Committee and a Conservative MP, said: “Recent reports show that the public finances are in a stronger position than anticipated, and the Chancellor should use this additional fiscal firepower to bring forward support for those on the lowest incomes.”

The report highlighted that expert witnesses had suggested to the committee that diesel prices could reach £3 per litre and petrol £2.40 per litre.

Substantial rises in gas and electricity bills are also expected to be exacerbated in the coming months and there are concerns overall inflation could hit double digits later this year.

The committee's report said: "Despite producing significant amounts of oil and gas, the UK is not protected from the economic consequences of sanctioning Russian oil and gas production. The price paid for gas in the UK is dependent on the level of demand for gas in Europe. The

price paid for oil in the UK is dependent on the global price of oil. Further sanctions on Russian oil or gas will lead to higher prices which in turn will feed through to UK households and businesses."

Mr Sunak is expected to announce a temporary cut in fuel duty of 5p per litre while the threshold for paying National Insurance contributions could be raised. But it is expected the planned overall rise in National Insurance will still go ahead.

The statement is expected to focus on Mr Sunak’s plans to create “a new culture of enterprise” and see the Chancellor argue that providing workers with the right skills to progress is the “best approach to managing the cost of living in the long term”.

Mr Sunak is expected to say that building a stronger economy is vital to responding to the threat of Putin.

“We will confront this challenge to our values not just in the arms and resources we send to Ukraine but in strengthening our economy here at home,” he will say.

“So when I talk about security, yes – I mean responding to the war in Ukraine.

“But I also mean the security of a faster growing economy. The security of more resilient public finances. And security for working families as we help with the cost of living.”

Public sector debt remains at a level not seen since the early 1960s – at £2.3 trillion at the end of February, or around 94.7 per cent of gross domestic product (GDP).

Mr Sunak said yesterday: “The ongoing uncertainty caused by global shocks means it’s more important than ever to take a responsible approach to the public finances.

“With inflation and interest rates still on the rise, it’s crucial that we don’t allow debt to spiral and burden future generations with further debt.”

Charity 'breaking unwelcome records'

Charity Citizens Advice said it was “continuing to break unwelcome records: issuing more food bank vouchers and referrals to charitable support than at any point since the start of the pandemic”.

Dame Clare Moriarty, the organisation’s chief executive, said: “In his Spring Statement, the Chancellor has a crucial opportunity to stem the tide of this cost of living crisis. Increasing benefits in line with inflation, expanding the Warm Home Discount and announcing a more generous energy rebate should be top of his list.”

Consumer group Which? found just one in 10 people believe the economy will improve over the next 12 months – and nearly three-quarters think the situation will get worse.

'Increase sanctions to force Putin to stop invasion'

Treasury Committee chair Mel Stride said the UK must continue with its strategy of causing the “maximum damage” to the Russian economy in a bid to force Putin to stop the invasion of Ukraine.

He said: “Putin’s deplorable invasion of Ukraine has sent shockwaves around the world.

“We condemn the inhumane actions of President Putin and are united in the view that we must continue to press forward with significant sanctions to cause maximum damage to Russia’s economy in order to persuade Putin to stop.

"The committee will continue to investigate what additional tools we have in our armoury to further damage the Russian economy and its ability to fund this war.”

A Government spokesperson said: “The Government has put in place the largest and most severe package of economic sanctions that Russia has ever seen. We are committed to ensuring people comply with financial sanctions, and work is underway at pace across government to ensure banks, financial institutions, businesses and individuals understand them - including with updated guidance on gov.uk, webinars, blogs and dedicated phone lines and inboxes available to address queries.

“The unprovoked invasion of Ukraine and resulting impacts on global markets will inevitably affect the UK economy. The precise impacts are uncertain but we are monitoring the situation closely. We are already providing support worth around £21 billion across this financial year and next, and the Chancellor will outline further plans to help families with the rising cost of living in the Spring Statement later today.”

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