# UK’s Sunak, under fire over cost of living, defends his tax cut plans
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-03-28
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: UK finance minister defends tax cuts amid criticism of
Meta Description: British finance minister Rishi Sunak defends his recent tax cuts as a progressive move amidst criticism for not aiding the poorest households. Read more.
URL: https://financedigest.com/uks-sunak-under-fire-over-cost-of-living-defends-his-tax-cut-planshtml

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LONDON (Reuters) -British finance minister Rishi Sunak on Monday defended the tax cuts he announced last week, after they were widely criticised for not helping the poorest households through the most severe hit to living standards since at least the 1950s.

With the Russia-Ukraine conflict pushing up already high energy prices and putting British inflation on course to reach almost 9%, Sunak told lawmakers that his overall policy plan, including measures taken last year to help people on welfare benefits, were “highly progressive”.

He also said borrowing more, on top of his huge spending to shield the British economy from the COVID-19 pandemic, would risk fuelling the inflation hit felt most by the lowest earners.

“I am comfortable that the choices I have made are the right ones for the country,” he said.

Sunak rejected suggestions he should have [targeted his latest tax](https://www.financedigest.com/britains-tax-take-risks-blowing-green-energy-off-target.html "Britain’s tax take risks blowing green energy off target") cuts only at people on welfare.

He said he would wait to see whether further [support for households facing surging energy costs](https://www.financedigest.com/5-ways-to-support-your-employees-during-the-cost-of-living-crisis.html "5 ways to support your employees during the cost of living crisis ") would be needed in October, when power bills are due for a twice-yearly reset.

In February, he announced a 9-billion-pound ($11.8 billion)package to spread some of the [electricity and gas price](https://www.financedigest.com/swedish-energy-minister-need-to-decouple-gas-from-electricity-price.html "Swedish energy minister: need to decouple gas from electricity price") pain.

Let’s wait until we get there and then decide on the most appropriate course of [action,” Sunak](https://www.financedigest.com/british-pm-rishi-sunak-pledges-further-action-on-strikes-to-protect-lives.html "British PM Rishi Sunak pledges further action on strikes to ‘protect lives’") said.

A recent [fall in prices](https://www.financedigest.com/uk-house-prices-stabilise-after-four-month-fall-halifax-says.html "UK house prices stabilise after four-month fall, Halifax says") in energy markets would mean a lessening of the projected hit to household incomes this year if those lower prices continued in the coming months, he said.

Underscoring his limits for easing the cost-of-living crisis, Sunak said the headroom built into his [tax and spending plans](https://www.financedigest.com/uk-drops-plan-to-tax-sovereign-wealth-funds.html "UK drops plan to tax sovereign wealth funds") could easily be undone by weaker-than-expected growth or higher interest rates.

If you took the [Bank of England’s](https://www.financedigest.com/what-to-make-of-the-headlines-brexit-and-bank-of-england-policy-eba-bank-stress-tests.html "What to make of the headlines? Brexit and Bank of England policy, EBA bank stress tests") economic outlook as opposed to the OBR’s (Office for Budget Responsibility), an equally credible institution, that would wipe out over half of it,” Sunak told lawmakers.

A 1% increase in [BoE interest rates](https://www.financedigest.com/boe-raises-rates-again-as-investors-look-towards-end-of-hikes.html "BoE raises rates again as investors look towards end of hikes") or a 1% change in the tax-to-gross domestic product ratio would eliminate the headroom entirely, Sunak said.

In a half-yearly budget update last week, he announced an immediate fuel duty cut and a softening of April’s increase in social security contributions, as well as an income [tax cut](https://www.financedigest.com/uk-home-asking-prices-rise-tax-cuts-to-spur-demand-rightmove.html "UK home asking prices rise, tax cuts to spur demand: Rightmove") for 2024.

But his plans were widely criticised for not doing enough to help [households on the lowest incomes](https://www.financedigest.com/four-fifths-of-uk-households-saw-disposable-income-fall-in-august-says-asda.html "Four fifths of UK households saw disposable income fall in August, says Asda").

($1 = 0.7639 pounds)

(Reporting by William Schomberg and Andy Bruce; Editing by Alex Richardson)


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