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Saturday, Feb 22, 2025

U-turn on energy profits flags up Sunak’s lack of long-term plan

Analysis: Many Tory MPs say they don’t get what the chancellor stands for and this policy reversal won’t enlighten them
“He’s out-Laboured Labour” was the verdict of one upbeat Tory aide after Rishi Sunak announced £15bn worth of handouts to UK households in what was, to all intents and purposes, an emergency budget.

The scale of the package was larger than many in Westminster had expected. But when Sunak decides to do a U-turn, he tends to go big.

The “temporary targeted energy profits levy” – don’t say windfall tax – raises significantly more than Labour’s would have. And the cost of living payments were more targeted, and much more generous, than the measures in the spring statement.

As Paul Johnson, the director of the Institute for Fiscal Studies, put it: Sunak’s overall approach – taking this announcement along with other recent outings – is “hugely redistributive, taking from high earners and giving to the poor”.

After the punishment beating Boris Johnson’s Tories have taken over Partygate, the announcement will have done him no harm with backbenchers fed up with having no answer to constituents struggling to heat their homes or feed their kids.

Backbench MPs from across the party had been putting pressure on the Treasury to act and in the absence of a clear steer, floating their own widely differing plans for tackling the crisis.

Johnson was widely ridiculed earlier this month when he responded to a heartbreaking story from a Good Morning Britain viewer, Elsie, about riding around on buses to save on energy bills by boasting about the Freedom Pass.

Next time he is asked, Sunak’s package will give the prime minister something concrete to say.

After many months of being the leading contender to succeed Johnson, Sunak’s ham-fisted spring statement, combined with negative stories about his personal tax affairs and those of his super-rich wife, had led many to write off his leadership chances.

But the blizzard of slick social media messaging that poured out alongside the statement – complete with Sunak’s signature – suggested the one person who hasn’t written off his chances is the chancellor himself.

The lofty tone of his speech in the chamber harked back to Sunak’s greatest political hit, the furlough scheme, as he promised, “this government will not sit idly by whilst there is a risk that some in our country might be set so far back … they might never recover”.

Yet when you look back on the past six months, the overwhelming impression is of a government without what George Osborne used to call a “long-term economic plan”.

They were against a windfall tax, now they have implemented one. Sunak claims to be a tax-cutting chancellor, but the tax burden is rising. He thinks tackling the deficit is a “moral responsibility”, but two-thirds of Thursday’s £15bn package is unfunded or, in other words, paid for by increased borrowing. And he repeatedly implements policies that are partly – or fully – reversed, sometimes just a few months later.

The £20 universal credit uplift was scrapped, but then part of the cut was handed back to low-income households with a cut in the taper rate. The hard-fought health and care levy was partly handed back with the increase in the NICs threshold. And a widespread backlash has led Sunak to cancel plans to claw back October’s energy bill rebate –while doubling its value. Putting it politely, he’s all over the place.

Cabinet ministers put these zigzags down partly to wrangling between Sunak and Johnson, who are very different Conservatives without a shared political project – if indeed Johnson has a project at all, aside from keeping himself in No 10.

But many Conservative MPs say they struggle to discern what it is the chancellor stands for either, aside from burnishing brand Rishi. Thursday’s statement, embracing a policy he had previously scorned, and all but conceding that the spring statement fell way short of the scale of the crisis, did little to change that.
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