Meeting of the Parliament (Hybrid) 03 February 2022
This is an important and timely debate, as hundreds of thousands of families and households across Scotland are facing very challenging financial circumstances as a result of rising costs and high inflation. As we have seen reported in today’s news, the Bank of England has said that UK households must now prepare for the biggest fall in living standards since records on the subject began three decades ago, and for the worst pay erosion since 1990.
We have also had Ofgem’s announcement today that households face an eye-watering 54 per cent increase in their energy bills. That is a real hammer blow to customers in Scotland and throughout the UK. Analysis estimates that that price cap increase could move around 200,000 further households in Scotland alone into fuel poverty and around 235,000 households that were already fuel poor could move into extreme fuel poverty. That sits within a wider context of increasing pressures on household costs. We are in a cost of living crisis that calls for immediate action.
From April, workers and businesses throughout the country will have the added pressure of a rise in national insurance contributions—a policy that was announced without prior notice or consultation with the devolved Administrations. Of course, we are told that that hike is to pay for the national health service, despite the fact that we were told that Brexit would deliver £350 million a week towards the NHS. We recognise the added need for health and social care funding, but the UK’s decision to raise that by taxing workers rather than wealth is a missed opportunity.
On top of that, the Bank of England has announced that interest rates will be raised by 0.5 per cent, inflation will surpass 7 per cent and gross domestic product forecasts will be slashed, leaving Scottish taxpayers to experience the worst living standard decline of the past few decades.
Powers relating to the energy markets remain reserved to the UK Government—I wish that Jackie Baillie had borne that in mind when she made her attack on the SNP and Green Government. Therefore, the UK Government must act urgently to address the crisis. The Cabinet Secretary for Net Zero, Energy and Transport and the Cabinet Secretary for Social Justice, Housing and Local Government have written more than once to the UK Government to reiterate the need for urgent action and has offered a series of proposals to support energy consumers, including targeted direct support. We await a response from the UK Government over and above what it has said today.
The tax levers to help hard-pressed households are also reserved to the UK Government. They include the power to vary VAT rates on consumer bills in the short term. I am sorry to hear that the UK Government appears to have ruled that out today as well, despite the fact that Boris Johnson said that Brexit would give him the opportunity to cut VAT rates. The rates that apply to the provision of energy-efficient materials and the retrofitting of buildings could also be cut, which would contribute to long-term bills being reduced. The Scottish Government has called for action on that and continues to do so, including urging the UK Government to reconsider the decision not to reduce VAT on energy bills.
For our part, the Scottish Government is very committed to supporting people in Scotland, especially those who are on low incomes. We are already using all powers and resources available to us to support people in Scotland, including through energy efficiency investment, Home Energy Scotland advice, support on housing costs, welfare, debt advice services, the child winter heating assistance, the money talk team service, which is now up and running, and support to address food insecurity.