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David Cameron has urged a return to austerity to combat the cost-of-living crisis amid signs of growing Cabinet unrest over soaring energy bills.
And in a message to Boris Johnson and the Chancellor over the looming national insurance rise, he said it is crucial to ‘keep the cost of government down and people’s taxes down’.
The intervention came as pressure mounts on ministers to come up with a way of easing the pressure on families, with fears of an economic shock on the scale of the 1970s oil crisis – when inflation hit 23 per cent and interest rates 17 per cent.
It is understood that Business Secretary Kwasi Kwarteng has floated doubling £200 loans scheduled to ease the impact of energy bill rises in October, after being asked to come up with options by Downing Street. The idea of delaying the repayments, due to be made in £40 installments added to bills over five years, has also been mooted.
But Rishi Sunak is believed to be resisting changes that could impose more burden on government budgets after Covid, with less than two weeks until he delivers his Spring statement to the Commons.
Appearing on LBC, David Cameron warned it is going to be a ‘very tough year’ for households as the Ukraine war and standoff with Russia fuels already-surging inflation
It is understood that Business Secretary Kwasi Kwarteng (right) has floated doubling £200 loans scheduled to ease the impact of energy bill rises in October, after being asked to come up with options by Downing Street. But Rishi Sunak (left) is believed to be resisting changes that could impose more burden on government budgets after Covid
Speaking on LBC’s Andrew Marr show, Mr Cameron said: ‘We are certainly looking at a huge squeeze on living standards, when you see what’s happening with oil prices, petrol prices, with heating bills.
‘It is going to be a very tough year. If you can keep the cost of government down and people’s taxes down, you help them through the cost of living crisis, that’s important.’
Energy prices around the world are soaring, with the ban on oil imports from Russia set to pile more pressure on already struggling British households.
Cabinet minister Michael Gove is among the senior Tories who have compared the current chaos to the 1970s oil shock.
That crisis was triggered in 1973 when Arab countries acted to quadruple the price of oil and imposed an embargo in protest at the West’s support for Israel during the Yom Kippur War.
In the ensuing chaos, UK inflation reached nearly 23 per cent in 1975.
Rocketing inflation – currently 5.5 per cent – could leave the average family £1,750-a-year worse off, according to think-tank the Institute for Fiscal Studies. Some fear inflation could hit 8 per cent within months.
But in a slight glimmer of hope, the price of a barrel of oil has eased back after reaching as high as $140 on Monday.
The United Arab Emirates is encouraging fellow Opec members to increase oil production as the West bans Russian imports, which is further pushing down prices, albeit still to a still exceptionally high level.
Tory MP Steve Baker, of the Conservative Net Zero Scrutiny Group, told the Daily Mail: ‘I’m afraid I fear an economic crisis worse than the 1970s, but I don’t wish to be too alarmist because what actually happens will depend on the policy response.’
He said: ‘I fear that we still have the biggest bond market bubble in history, that we had inflation coming anyway, and this crisis will feed the inflation that’s coming. That will force the Bank of England’s hand on interest rates.’
The price of a barrel of oil is spiking upwards and is expected to get worse as the US pushes for a global ban on buying Russian oil. There was a slight drop today amid claims that more oil would be released by the West
Industry consultant Rystad Energy told the Bloomberg news network that wider sanctions on Russian oil would create a 4.3million barrel a day hole that ‘cannot simply be replaced by other sources of supply’.
Meanwhile, the Government was yesterday warned that the cost of supporting households with gas and electricity bills could more than double.
The Institute for Fiscal Studies said to give households the same degree of protection as Mr Sunak originally intended, the Government will need to find more than £12billion on top of the original £9billion it had planned to hand out.
This will take the total cost of the package above £21billion.
A Treasury source told Politico that there were no plans to change the rebate package that had been set out.
Mr Sunak, who makes his Spring Statement on March 23, had also planned to give workers in the public sector, such as teachers and nurses, a long-awaited pay rise.
But experts say if he wants their wages to increase in real terms at the rate he intended he will need to give them an extra £1,750 each – or £10billion in total.
Drivers are suffering ‘unbelievable financial pain’ as the cost of a tank of diesel for a Ford Focus hit £85 on Tuesday— up £1.50 in 24 hours – and a tank of unleaded is £81.01, and both could hit £90 in March. A large family car will now cost more than £100 to fill up and a gas-guzzling 4×4 Land Rover north of £165 per tank.
Figures from data firm Experian Catalist show the average cost of a litre of petrol at UK forecourts on Tuesday was 158.2p, up from 156.4p on Monday. The average cost of a litre of diesel reached a new high of 165.2p on Tuesday, up from 162.3p on Monday. These are all record highs.
Diesel has been on sale at 189.9 and petrol at 183.9 at Pease Pottage on the A23 near Brighton in West Sussex
Source: Daily Mail