PARLIAMENTARY DEBATE
Middle East: Economic Update - 21 April 2026 (Commons/Commons Chamber)

With permission, I will update the House on the spring meetings of the International Monetary Fund and the continued action that the Government are taking to strengthen our economic and energy security in response to the conflict in the middle east.

We did not start this war and we did not join this war, but since the war in the middle east broke out, I have been clear-eyed about my duty: to be responsive to a changing world and responsible in the national interest. The best economic policy today is our diplomatic policy—negotiation, de-escalation and the permanent reopening of the strait of Hormuz.

Last week in Washington, I held talks with world Finance Ministers, including the US Treasury Secretary, Scott Bessent. I struck a joint agreement with 10 other major economies, calling for a swift and lasting negotiated resolution to the conflict and agreeing to avoid unnecessary trade restrictions to support energy and food security. We agreed to maintain maximum economic pressure to ensure that Russia cannot profit from this war. I was proud to announce the UK’s third tranche of the Extraordinary Revenue Acceleration funding for Ukraine’s defences, as well as continuing to work with the US Administration to increase economic pressure on Iran.

The Prime Minister has also led global action, convening a summit of nations with the President of France to work together to support freedom of navigation through the strait of Hormuz. The UK will continue to play its part, including engagement with the insurance industry to support shipping when conditions allow.

We are continuing to plan for every eventuality, but we must deal with the economic costs that are already being felt. I reject the demands for a knee-jerk response to this crisis that would put household finances at risk through higher inflation and higher interest rates. Every choice that I make will be about keeping costs down for families and businesses. That is why I have extended the 5p cut for fuel duty twice since the election, saving the average motorist £90 a year compared with the plans that I inherited. It is why I have frozen prescription charges for two years in a row and frozen rail fares for the first time in 30 years; it is why I am taking £150 off energy bills with additional help for those struggling with the cost of heating oil; and it is why I have expanded the British industrial competitiveness scheme to over 10,000 manufacturers, addressing long-term competitiveness and cutting electricity costs from this year.

During the last energy shock, the previous Government’s package of unfunded and untargeted support saw more than a third of direct energy bill support go to the wealthiest households. That meant higher inflation, higher interest rates and higher taxes. I will not repeat those mistakes. Last week, the IMF said that my plan is “the appropriate response” to the conflict. I led a joint statement, with 10 other major economies, agreeing to co-ordinate our domestic responses, to ensure that they are responsive and responsible. This Government have the right plan for our economy. At the spring forecast, we saw how the action that we have taken since the election has prepared Britain to better weather this conflict. Inflation was at 3% and set to fall to target—a lower base than at the outset of the Russia-Ukraine conflict, when inflation was high and rising. Borrowing was set to fall more over this Parliament than in any other G7 economy. We are set to reduce the deficit by £20 billion, from 5.2% to 4.3% of GDP this year. I increased our financial buffers, with headroom against the stability rule of £23.7 billion, so that we can weather shocks and keep borrowing costs down.

Last week, the IMF welcomed the UK’s “notable improvement” in our public finances. I am clear that the best way we can build a stronger, more resilient economy is through economic growth. I welcome recent figures showing that the economy grew by 0.5% in the three months to February and upgraded growth for the three months to January to 0.3%. I also welcome this morning’s labour market figures for February, which show unemployment coming down and real wages continuing to rise, as they have in every month since I became Chancellor—adding to the evidence that the Government have the right economic plan to steer our economy through the uncertainty ahead.

However, as I have said, the war in Iran will come at a cost. Last week, the IMF published its updated forecasts for the global economy in response to the war. It reduced its expectations for GDP growth in the United Kingdom and increased its expectations for inflation. That builds on the IMF’s judgment that the UK is more exposed to energy price shocks than our counterparts—a problem that the previous Government failed to address in 14 years—and on its observation that, since the last energy crisis, the UK has had higher inflation than other countries. The aftermath of Liz Truss’s disastrous mini-Budget, and the previous Government’s untargeted and unfunded support package, contributed to a more persistent rise in inflation and interest rates than in other countries around the world.

The IMF’s forecasts are a stark reminder of why we must stick to our economic plan and go further and faster on delivering economic security. Since the election, we have invested in clean, home-grown energy, in renewables and in nuclear power. In 2025, we imported 17% less gas than in 2021, and gas generation now sets the wholesale price of electricity around a third less frequently than it did in the early 2020s, meaning that our energy system is now more secure and less exposed to volatile global energy prices.

Today we are going further, with a package of changes to reduce our reliance on imported oil and gas, boost the use of renewables, and smooth the impact of energy price shocks. First, oil and gas production from the North sea is an important and valuable resource, and its workforce is a vital asset for our country. That is why we are harnessing our domestic supply by managing existing fields for their entire lifetimes, including by allowing tiebacks for those fields to ensure that they remain viable. Today, in advance of legislation, we are publishing further details on tiebacks, which I first announced in the Budget. External analysis has predicted that they could result in tens of millions more barrels of oil and gas being available for UK supply. Today’s announcement gives industry greater clarity to support investment in those projects and maximise supply from our existing sites to support our energy security.

Secondly, we are sweeping away the barriers to new renewables investment by accelerating vital grid infrastructure, reforming land access rules and extending permitted development rights, as well as making more public land available for renewable infrastructure, which could unlock up to 10 GW of capacity, and helping households and businesses to switch to clean, cheaper renewable electricity through plug-in solar panels and better electric vehicle charging.

Thirdly, we are reforming our energy system. Currently, households and businesses pay more for their electricity when the gas price is high. The electricity generator levy already recoups some of the excess returns made by generators due to high gas prices. Today, I am announcing that I will extend the electricity generator levy beyond its scheduled conclusion in 2028, and, ahead of that, I will increase the rate of the levy from 45% to 55%. That will ensure that a larger proportion of any exceptional revenues from high gas prices are passed back to Government, providing a vital revenue stream so that money is available for Government to support businesses and families with the impacts of the conflict in the middle east. Crucially, it will encourage older low-carbon electricity generators, which supply about a third of our power, to move from market pricing to fixed-price contracts for difference.

New proposals, set out by the Secretary of State for Energy Security and Net Zero today, will further weaken the link between high gas prices and the price paid for our electricity, and limit the spikes in energy prices from driving up inflation and costs for households and businesses.

The Government have the right economic plan—a plan that was right before this conflict in the middle east started and is now essential to weather the impact of that conflict. The plan, backed by the IMF, will keep costs down for everyone and provide support for those who need it most. In a world that is more uncertain, it is a plan to build a Britain that is stronger and more secure. I commend this statement to the House.

I call the shadow Chancellor of the Exchequer.

I thank the right hon. Lady for advance sight of her statement.

The UK has some of the highest energy prices in the world. That is crippling our economy and pushing up the cost of living, and it leaves us particularly exposed to energy shocks such as the one we are experiencing right now. Yet the Government seem totally unwilling to accept the scale of the problem and to shift in their dogmatic commitment to a net zero agenda, which is making us poorer.

Last year, we Conservatives came forward with our cheap power plan. We said that the Government needed to scrap carbon taxes and the renewables subsidies, which are pushing up bills, and reverse the nonsensical decision to rely on imported oil and gas instead of pursuing the common-sense approach of extracting our own resources from the North sea. Under pressure from this Conservative Opposition, there has been some progress at least, but it has been made at a snail’s pace. The Secretary of State for Energy Security and Net Zero has been dragged, with oh so much reluctance, in the direction that we have set out.

The action taken goes nowhere near far enough and is not fast enough. At the Budget, the Government announced they would take 75% of the cost of renewables off bills, but they did not abolish the subsidies, as we called for them to do. They are still being paid—maybe not out of people’s energy bills, but out of the pockets of hard-working taxpayers. When it comes to the vast majority of businesses in our country, this Government have done nothing for them.

The proposals announced today risk locking in the costs of those subsidies by including them in the new contracts for difference, to which the Government are hoping that energy producers will sign up. Can the Chancellor confirm that this is the case—that under these arrangements, these subsidies will not only persist but will be guaranteed? The new contracts announced today are, of course, voluntary, so on what basis do the Government think these changes will lead to an overall reduction in energy bills? Presumably, generators will only sign up to these arrangements if it is in their commercial interest to do so. How will the Government ensure that companies do not simply game the system and end up being guaranteed higher prices?

By how much will these announcements reduce energy bills? Has the Energy Secretary even provided the Chancellor with an estimate of the impact on bills? If there is no estimate, how can the Chancellor be confident that bills will indeed be reduced, not increased? On that point, we can put a number on our plan: it would mean £200 off household bills. Why can the Chancellor not do the same with this latest announcement?

The Government have also said they will get rid of carbon price support. That is welcome, but they are not doing it until next year, and the CPS is only part of the carbon tax, which the Opposition are clear needs to be scrapped completely. It costs both households and businesses, and it needs to go. Why will the Chancellor not commit to removing these taxes completely? On taxes, the Chancellor noted the importance of keeping fuel duty down, but once again she had nothing to say about the onerous increase that she still plans to bring forward in September.

Finally, we have had no meaningful action today on the issue of North sea oil and gas. The Chancellor says she wants to reduce our exposure to global energy prices, yet the Government are choosing to leave us more reliant on imported hydrocarbons. We all know that she is in a completely different place on this to the Energy Secretary. He is committed to the gradual smothering of our oil and gas sector, regardless of the cost to our economy and the loss of those jobs and tax revenues. Why does the Chancellor not urge the Prime Minister to overrule the Energy Secretary on these matters? The revenues from new oil and gas extraction are vital, given the state of our public finances.

The current crisis shows how exposed we are and how damaging the Government’s net zero obsession has been to our economy, to households and to businesses. The Government are right to want to reduce that exposure, but they are doing too little, too late. We need an urgent change of course, not dither and delay. We need a proper cheap power plan to get bills down, and we need it now.

That response exposes a shadow Chancellor who is out of credible ideas. I was sad to read in the weekend’s newspapers that once again, he is being lined up for the sack by the Leader of the Opposition, but to be honest, after his performance today, I can understand her choice.

The shadow Chancellor talks about the IMF. Yes, the IMF did downgrade the forecast. Why? It is because of a war, which his party unquestioningly backed, and because of our high exposure to global energy markets, which his party allowed. We are taking the right choices. We did not back this war, nor did we follow the calls of the Leader of the Opposition and the leader of Reform to join in. We are investing in and reforming our energy market, so that we can take back control of our energy security.

The shadow Chancellor talks about the economy. Well, let’s talk about the economy. Before this war broke out, our economy grew by 0.5% in the three months to February and 0.3% in the three months to January. Inflation was expected by the Bank of England and the Office for Budget Responsibility to return to target, and interest rates had been cut by their fastest rate in 17 years, compared with hitting 5.25% under the Conservatives, which saw mortgage costs going through the roof. [Interruption.] The hon. Member for Wyre Forest (Mark Garnier) says it is the Bank of England’s job to address inflation, but we had the same Bank of England when the Conservatives were in government. It has cut interest rates while we have been in government because we got control of the public finances, and the Conservatives lost control of the public finances.

The shadow Chancellor says that the response to a fossil fuel crisis is to rely more on fossil fuels and to reduce investment in clean, home-grown energy. He is ignoring the fundamental lesson of both Russia’s invasion of Ukraine and the conflict in the middle east. The shadow Chancellor opposed new solar energy, opposed onshore wind power and did not invest in either Sizewell C or small modular reactors, as this Labour Government are doing. Just today, the CEO of RenewableUK has said that

“reducing the link between the volatile global gas prices and the cost of electricity is the best way to protect households, businesses and industries against the unpredictable and volatile costs of fossil fuels in the long term, to strengthen the UK’s energy security.”

The shadow Chancellor says that tiebacks make no difference, yet Offshore Energies UK says that

“developing fields as tiebacks reduces costs, lowers emissions, and extends the life of existing critical infrastructure”,

which is exactly why we are doing it.

The shadow Chancellor says that delinking would lead to higher prices. It is the exact opposite. The whole aim here is to move to fixed prices. By increasing the electricity generator levy—we do not know whether the Conservative party supports or opposes it—we incentivise those energy companies to come off the levy and come on to contracts for difference. We are beginning the negotiations with industry, so that we can reduce that volatility in prices. As the CEO of E.ON has said today,

“For too long, the value in our energy system has flowed to those at the top of the chain. Today’s move starts to turn that around”,

because we can take out of the system the volatility and the spikes, which are so damaging for both family finances and business finances. But the shadow Chancellor had nothing to say on that.

Fuel duty was never lower in 14 years under the Conservatives than it is today. Of course, we are keeping all scenarios under review, but it is quite clear that the best way to bring down fuel prices is to de-escalate this conflict, not ramp it up like the Conservatives want to do.

The shadow Chancellor has nothing to say on international co-operation, nothing to say on global negotiations to keep the strait of Hormuz open, nothing to say on reform of our energy market and nothing to say on investment in our infrastructure. Why? It is because he has no plan. Why? Because he does not have any ideas. Why? Because his party has no economic credibility. Labour has the right plan for our country. The Conservatives would take us right back to the bad days of high inflation, high interest rates and the mess they made of our economy.

The conflict in Iran is also a matter of energy security and the cost of energy. It is a reminder for the second time in four years of the dangers of being dependent on international fossil fuel markets and of the need to reduce our dependence. The Energy Security and Net Zero Committee has heard a lot of evidence about the importance of decoupling the price of electricity from the price of gas, so may I encourage the Chancellor to bring forward measures that will reduce the amount of time that gas can continue to set the price of electricity? It is a pity that the Conservative party did not take that approach following the invasion of Ukraine in 2022 when it had the chance.

I thank the Chair of the Energy Security and Net Zero Committee for that question, and for his important work on this issue. There are two ways to reduce the number of days in which the gas price sets the electricity price. First is to invest more in home-grown renewables and in nuclear, so that more of the mix is made up of electricity. The second way is to delink gas and electricity prices, first by increasing the electricity generators levy to bring in money but also—this is crucial—by incentivising those companies that are currently getting the market price to go instead on to a contract for difference, which gives greater certainty for families, pensioners and businesses with their bills. That is exactly what we are doing.

I call the Liberal Democrat spokesperson.

I thank the Chancellor for advance sight of her statement.

The Chancellor should have come here today to explain how she was going to use the £20 million extra that the Treasury is pulling in every single day through higher VAT, a higher energy profits levy and other taxes, to tackle the immediate cost of fuel crisis that is facing families and businesses today. The Chancellor is fundamentally wrong when she says that a knee-jerk response would have put household finances at risk through higher inflation and higher interest rates. We need just to look at what other countries are doing. The Government could have used that £20 million to drive down prices—the price of petrol at the pump, the price of train and bus fares, and the price of home-charging electric vehicles. Slashing those prices could have helped the Chancellor to control inflation and higher interest rates. That is what other countries are doing, and what we Liberal Democrats are calling for.

The Liberal Democrats were the only political party to have in our manifesto a commitment to break the link between gas and electricity prices, so we are glad that 18 months on, the Government have finally listened.

In addition to the measures outlined today, may I ask the Chancellor about two specific things? First, has she spoken to any banks about rolling out low-interest loans for householders who want to do the right thing and adopt energy-saving measures, but are struggling with the up-front costs? Secondly, I met the Competition and Markets Authority on Monday. The CMA and Ofgem both agree that there is a case to answer about the broken energy market and why hospitality and small businesses are being blocked. Will the Chancellor join me in writing to Ofgem and asking it finally to investigate, without any further delay, a broken energy market that is blocking hospitality and small businesses from accessing the best deals?

I welcome the fact that the hon. Lady and her party opposed the war and did not want the UK to become involved, unlike the Conservatives and Reform. However, I find what she has just set out fundamentally economically illiterate. The idea that a great fiscal policy is to close the strait of Hormuz! Why did we not think of that when we came to office? If we close the strait of Hormuz, all our problems will be over because we can get in all this money—that is what the hon. Lady is suggesting; that we will get some great windfall from a tax. The truth is that the IMF and every other forecaster are clear that tax revenues will be lower, not higher, because of the conflict in the middle east. The money that the hon. Lady wants us to spend simply does not exist. I am afraid she is falling into the failed economic policies of the Conservatives, who delivered untargeted, unfunded support that resulted in higher interest rates, higher inflation and higher taxes. She is suggesting an untargeted approach, but that is what got us into the mess we are in today.

I welcome the fact that the hon. Lady supports us on decoupling, which is the right thing to do with our gas and electricity prices. I regret that she and her party did not support the Planning and Infrastructure Act 2025, which enables us to build the homes and energy infrastructure that we need. On working with banks, the Department for Energy Security and Net Zero is working with every high street lender and energy company to help people who are struggling with their bills.

As my right hon. Friend mentioned, in 2022 Liz Truss launched a household energy support package that provided blanket support to every household, including the most well off. It was estimated to cost between £57 billion and £60 billion, just over the first six months; that was predominantly funded by borrowing. Does my right hon. Friend agree that the right and fiscally responsible thing to do during this crisis is to provide targeted support to those who need it most?

More than one third of that support for energy bills went to the top third of households. That makes no sense at all, especially when those households then end up being burdened with higher interest rates on their mortgages, higher inflation in the shops, and higher taxes for years to come. The right approach is a targeted one, to keep costs and interest rates down for everybody. Of course, the best economic policy would be a de-escalation of this conflict, not ramping it up, as the Conservatives and Reform want to do.

The Chancellor will be aware of how important aviation is to the UK economy, particularly Heathrow, which is responsible for a huge amount of air freight and economic activity in my constituency. Given the reports regarding the supply chain for kerosene used in aviation, what measures is the Chancellor taking to ensure kerosene supply? What consideration has she given to tax relief to ensure that our aviation sector is sustainable and continues to contribute to the UK economy?

As the hon. Gentleman knows, the Government are a big supporter of our airports and the aviation sector. That is why we are backing a third runway at Heathrow, a second runway at Gatwick, as well as expansion at Stansted and Luton airports. We are in regular contact with the aviation sector. It is currently not reporting any challenges with security of supply, but as the hon. Gentleman and the House would expect, we are planning for all different scenarios. The best way to ensure security of supply is to reopen the strait of Hormuz by working to de-escalate this conflict.

I welcome the fact that in this time of economic shocks, the Government are playing their proper role in protecting UK households from the worst harms, and I thank the Chancellor for the work that she is doing with other Finance Ministers and Governments to bring about a de-escalation of the war—unlike others, who advocate for escalation. Does she agree that, in addition to taking the measures that she has talked about today, and that the Secretary of State for Energy Security and Net Zero has announced, she must continue, alongside the rest of the Government, to press other Governments for de-escalation of the war? That is the best way to protect UK households.

That is why the whole House welcomed the Prime Minister and the French President convening a meeting of 50 countries on Friday, to work on how we could reopen of the strait of Hormuz and, crucially, on the protection of vessels travelling through it, when it is safe for them to do so; and it is why I have been working with the insurance industry to ensure that the right cover will be available to vessels, when it is possible to travel through the strait again. When I was in Washington last week, I met our allies from the Gulf countries, who made clear the importance of reopening the strait of Hormuz and preserving toll-free travel through it.

Prices are going up, and if the Chancellor’s 5p increase in fuel duty between September and next March goes ahead, we will be the European country with the eighth highest fuel duty. Surely this is not the time for that increase. If she wants certainty, the best thing she could do, at that Dispatch Box, is cancel the fuel duty hike.

I understand the concerns that people have about filling up their car with petrol and diesel right now. We have introduced the cheaper fuel finder tool, so that people can compare prices and get the best deal when they fill up their car, and we have had all the petrol retailers into No. 11 Downing Street to ensure that we do not have any price gouging. There are still four and a half months until September. We are preparing for every eventuality. I have extended the fuel duty freeze and the 5p cut twice already, which means that the average motorist is saving £90 more than they would have done under the plans that I inherited from the Conservative party.

The conflict in the middle east has again highlighted just how vulnerable our off-grid rural households are to fossil fuel-driven energy shocks. Does the Chancellor agree with me that the warm homes plan is a major opportunity to upgrade rural housing and cut bills? Will she confirm what further steps the Government are taking to encourage the take-up of low carbon technology?

I thank my hon. Friend for raising the challenges felt in many rural communities. Those challenges are why I put in place additional money to help people with the cost of heating oil. We recognised that the £150 off energy bills introduced in April does not apply to heating oil, and we wanted to ensure that people had support with that. We are also extending and increasing the generosity of the warm homes plan, in particular by including boiler upgrades. That will help people in all communities, including rural communities, where the cost of heating homes is often higher.

We are very fortunate in Scotland to already produce more renewable electricity than we consume, and of course we produce more oil and gas than we consume as well. Unfortunately, we do not experience any benefit in our bills. The Chancellor had the cheek to say that she regards the oil and gas workforce as a vital asset to the country, but they certainly do not feel like that, because a thousand of them are losing their job every single month. If she believes in jobs, investment, energy security and reducing climate emissions, will she outline why she has not yet moved to the oil and gas price mechanism? Why is the Chancellor allowing the Energy Secretary to overrule her and prioritise imports of liquefied natural gas, rather than supporting domestic energy sources?

People in Scotland, and right across the UK, benefited from the money off their energy bills. We are one of the few countries in the world where energy bills for households went down in April, rather than up. That was because of the changes that I made in the Budget. Of course, that benefits households in Scotland as well. Today, the Energy Secretary and I have announced changes around tiebacks. The previous Government could have made such changes, but they did not. Offshore Energies UK has said:

“developing fields as tiebacks reduces costs, lowers emissions, and extends the life of existing critical infrastructure.”

This policy will help to create and support more jobs in Scotland in this vital sector. If the Scottish National party is so concerned about jobs, why does it not back nuclear in Scotland, just as this Labour Government back nuclear in England and Wales?

I welcome the Chancellor’s statement and the announcements made by her and the Energy Secretary. We have seen two fossil fuel shocks in just the past five years, which have done untold damage to our economy. Half the recessions since the 1970s have been caused by similar fossil fuel shocks. It is clear that the move to clean, home-grown energy is good for the economy, good for security and good for household bills. What conversations have she and the Energy Secretary had with organisations that might be taking up voluntary agreements? When might those agreements be made, and when will we see the benefit of breaking the link between gas and electricity prices?

Investment in nuclear and renewables can ensure security of supply, and security of price. Investment in fossil fuels cannot secure security of price, because that price is determined by international markets. A third of power is electricity that is not covered by a contract for difference. We are trying to get that on to contracts for difference, so that we can stabilise prices and avoid the spikes that we see because of the volatility in fossil fuel prices that my hon. Friend mentioned. The Energy Secretary and I have already met representatives from the energy sector to discuss this policy and the negotiation of contracts for difference. After the negotiations, and given the incentive to avoid the higher electricity generators levy, we are confident that many businesses will be happy and willing to move, through a negotiated price, on to contracts for difference.

The strangely cheerful outing by Treasury Front-Bench Members today makes them the equivalent of the band playing on the deck of the Titanic, as the Government sink around them after hitting the iceberg that is Peter Mandelson. If the Chancellor thinks that anybody out there genuinely feels that she has made the economy more resilient to economic shocks, then I am sorry to say that she is living in cloud cuckoo land. I have met the families who have less money in their pay packets because of her tax raids. I have met the businesses that are making people redundant, cutting investments or facing closure because of her tax rises. If she wants to help people in the economy, she should cut taxes.

Today we have announced an increase in the electricity generators levy to help the hon. Gentleman’s constituents, and all our constituents, to get lower prices for electricity. Instead of talking the country down, he might want to mention the fact that the economy grew by 0.5% in February, unemployment went down today, we have the fastest deficit reduction pace of any country in the G7, and in every single month that I have been Chancellor, wages have risen by more than prices. That is very different from what happened when his party was in charge.

I thank the Chancellor for her statement. I agree that the best economic policy today is diplomatic policy. Given the situation in Iran, will she tell us more about her plans for putting economic pressure on the leadership there to de-escalate this dreadful situation?

My hon. Friend is absolutely right that the best economic policy is diplomatic policy; it is reopening the strait of Hormuz, and de-escalating this conflict. That is why the Prime Minister hosted, with France, the coalition meeting last Friday, and why, when I met the US Treasury Secretary last week, we committed to doing more to increase the sanctions and the economic pressure on Iran. My team of Treasury officials met US Treasury officials last week to work out what more can be done, following the excellent work that our two Treasuries have already done together to increase economic pressure on Iran.

As a result of this war, agricultural inflation is running at 7.6%—more than twice general inflation levels. Red diesel has doubled in price and fertiliser supply is under serious threat. Predictably, food prices are likely to rise, causing hardship for millions of people, partly because of Britain’s lack of food security. Is it not time for the Government to U-turn on the Conservative policy that they inherited, which means that England is now the only country in Europe that does not use its farm payments to actively support its farmers to produce food?

I thank the hon. Gentleman for his representation of the agricultural sector. As he knows, on the two occasions when we have extended the 5p cut in fuel duty, a commensurate benefit has been applied to red diesel, but I recognise the challenges faced, in the current conflict, by the agricultural sector and other sectors that are big users of diesel. That is why we are working hard with industry to ensure that the sectors get the support that they need. Crucially, we are also trying to de-escalate the conflict and reopen the strait of Hormuz to improve the availability of diesel and fertiliser.

I congratulate the Chancellor on her statement. The setting of electricity prices to international gas prices has long been blamed for the erratic nature of our electricity bills—indeed, that was previously accepted by the Conservative party. While the Conservatives complained about it and did nothing, this Government are seeking to take action to disconnect those two issues. Will the Chancellor advise when she thinks that families will start to see a benefit from the decoupling of electricity prices from international gas prices?

My hon. Friend knows what she is talking about, not least because she is the MP for Great Grimsby and Cleethorpes, but also as a result of her previous career before taking her seat at the last election. There are two ways in which people will benefit. The first is in the short term, through the higher electricity generator levy. We have increased the rate from 45% to 55%, which will bring in money this year that can help us as a Government to relieve some of the pressure on families and businesses. We will also use the higher levy to negotiate the contracts for difference at a good price for bill payers and taxpayers so that we get rid of that volatility. I am confident that in the months ahead, while we have the higher electricity generator levy in place, we will be able to negotiate the new contracts and reduce the volatility. Crucially, the reduction in volatility will benefit both households and businesses.

May I welcome the couple of positive references that the Chancellor made a little while ago to civil nuclear power? Given that we have in this country Rolls-Royce, a world-leading specialist in the design and construction of small modular mobile nuclear reactors, what plans do the Government have to support this particular sector so that we are less dependent on the whims of Iranian dictators in future?

I was really pleased last week to sign with Rolls-Royce the contract for the first fleet of small modular reactors in the UK. They will be located on Anglesey, but they will create jobs for people from Derby to Warrington and from Manchester to Sheffield, and of course in north Wales and on Anglesey itself. We are also working with Rolls-Royce as it looks to secure contracts overseas, as it already has with Czechia, creating more good jobs here in Britain for this exciting new technology, which will also have the benefit of secure, home-grown energy.

Because of the action of this Government, rural communities in Norfolk received the highest payment of support for heating oil, with more than £3 million in the whole of England. However, a huge concern is that more than 60% of the applications that have been made have not been completed by the local Conservative-run council. What will the Chancellor’s action be to ensure that Norfolk county council gets these payments into the pockets of my constituents?

I am sorry to hear that the Conservative-run council in South Norfolk has not completed 60% of the applications for help with heating oil. The Government made more than £50 million available and targeted it at such places and at my hon. Friend’s constituents, who need it most. I am very happy to follow up with the council to ensure that people get the support they need.

I am relieved that the Government are now committed to breaking—[Interruption.]

Order. Can we proceed without an unseemly exchange across the Dispatch Box? I would like to be able to hear the question from the hon. Member for Bristol Central (Carla Denyer), and I am sure that the Chancellor might also like to hear it so that she can respond.

I am relieved that the Government are now committed to breaking the price link between expensive gas and cheap renewables, but given that the proposed solution is voluntary for electricity generators, how will the Chancellor ensure that the proposals that she and the Secretary of State for Energy Security and Net Zero are putting forward will actually deliver substantially lower bills? If I send them to her office, will she consider the proposals from the think-tank Commonwealth for a mandated, not-optional, fixed-price model to ensure that billpayers are not left at the mercy of the volatile international fossil fuel market?

As I set out in my statement and as the hon. Lady said, we are delinking gas and electricity prices. That is the right policy, and we will achieve it through the increase in the electricity generator levy. By increasing it from 45% to 55%, we are providing a very strong incentive for companies that still get market prices to move on to contracts for difference to avoid the electricity generator levy. If they do not go on to a contract for difference, they will continue to pay the electricity generator levy, which I have extended today, and we can use that money to help people with their prices.

The hon. Lady’s commitment to lower prices and more secure supply would be a bit more credible if the Green party did not oppose new nuclear and the Planning and Infrastructure Act 2025, which will make it easier to build the infrastructure investment in renewables and clean energy that we desperately need to lower bills and get ourselves off fossil fuels.

I thank the Chancellor for her statement and for the work that she and the Energy Secretary have done in this regard. The focus on renewables and the decoupling of gas and electricity is most welcome, but may I point something out? One of the problems that we inherited from the Conservatives, who have the gall to complain about the high cost to businesses and households, is that we are heading towards curtailment fees in 2030 of around £6 billion per annum. Would the Chancellor be kind enough to meet me and my hon. Friend the Member for Camborne and Redruth (Perran Moon) to discuss some of the technological options available to us to mitigate those soaring costs?

I thank my hon. Friend for the interest that he has in this really important area. We are doing a number of things on this front. The Planning and Infrastructure Act, which passed through Parliament at the end of last year despite the opposition of the Conservatives and the Greens and the indifference of the Liberal Democrats, will enable us to build the infrastructure to get energy from offshore wind to people’s homes and businesses, as well as investment in battery technology so that we can store energy. My hon. Friend will also have heard the announcement last week that we will enable differential pricing at different times—for example, to be able to get free electricity in some cases at weekends, when the demand for energy is lower. Those are some of the things we are doing to better balance demand and supply on the grid, and I would be very happy to meet him to discuss the matter further.

Is the Chancellor aware that the price of gas in the US is 10% lower than at the start of the war, while here in the UK it is 30% higher? That proves that if we produce what we consume, there is actually a domestic price of gas. Will she have a word in the shell-like ear of the Secretary of State for Energy Security and Net Zero and tell him to get on and approve the licences at Jackdaw and beyond, including onshore? That would mean more gas, more production and lower prices.

I think that the hon. Gentleman has just said that he is in favour of fracking. If so, I look forward to campaigning against him on that.

I thank the Chancellor for her statement and for the work she is doing at this globally difficult time. As a proud coastal, naval and defence city, Portsmouth understands that economic, national and climate security are inseparable, from household bills to flood resilience and defence jobs. Will she reassure families and businesses in my constituency that today’s actions, such as decoupling, will protect them from rising costs, support the jobs that are so vital to our city and ensure that we have a city for future generations?

I thank my hon. Friend for standing up for her constituents in Portsmouth. The purpose of decoupling gas and electricity prices is to reduce the volatility. We all know from our constituencies how much lower-income families and pensioners, in particular, struggle with volatility in gas and electricity prices, because electricity is an essential and people need it for everyday use. Decoupling will smooth out some of the volatility in the price of energy, giving greater certainty to families, pensioners and businesses, which all have to contend with the volatility of the fossil fuel market. That is why we want to move to more contracts for difference, and that is what today’s policy will achieve.

In her statement, the Chancellor outlined a plan for tomorrow, but no help for today. The residents of Newbury—the small businesses and farmers—want to know how high the Chancellor will allow the prices of petrol, red diesel and fertiliser to go before she decides to take positive action and reduce the impact of the cost of living crisis on those people. How high do those prices have to go, Chancellor?

In Newbury, and indeed in all of our constituencies, people got £150 off their energy bills in April this year. There are very few countries in the world where energy bills fell in April; in most countries they are going up. That was possible only because of the measures I took in last year’s Budget. I have extended the 5p cut in fuel duty two times already since becoming Chancellor. Obviously, we are following very carefully what is happening in the middle east and looking at the impact on the UK economy, families and businesses, and we will be ready to respond. However, the best way to get bills and prices at the pump down is to de-escalate this conflict and reopen the strait of Hormuz. That is the policy of the hon. Gentleman’s party, and it is the policy of this Government, because that is the best way to help people with the costs of energy.

The Prime Minister was right not to take part in the war led by Donald Trump and Netanyahu, and the Chancellor is right not to engage in a knee-jerk reaction to this economic difficulty. However, will she keep under active consideration those who are most vulnerable—those who are on benefits and the hard-working families who will struggle to put food on the table, choosing between that and paying energy bills—and if need be, will action be taken immediately?

When the previous Government intervened in the case of an energy price shock, more than a third of the benefit went to the top third of income earners. That makes no sense at all when Government resources are stretched and when it resulted only in higher interest rates, higher inflation and higher taxes for the exact same people. That is why we are looking at what targeted action could be taken. It is also why, at the beginning of this month, the new state pension increased by up to £575 and we got rid of the two-child limit on universal credit, which will lift almost half a million children out of poverty over the course of this Parliament.

No farmers means no food, no hauliers means empty shelves, and no construction means a country that is not moving forward. In Northern Ireland, those three industries are now taking to the streets to protest, which is clear evidence that this Government’s inaction is pushing them to the brink. Will the Chancellor today do the right thing and commit to cutting fuel duty, scrapping punitive carbon taxes, and properly supporting the industries and sectors that are fundamental to this country’s security and stability?

In Northern Ireland and across the country, people got £150 off their energy bills in April, and of course Northern Ireland was the biggest beneficiary of the support for heating oil—that support went disproportionately to Northern Ireland, given its greater reliance on heating oil compared with the rest of the country. The British industrial competitiveness scheme will reduce business energy costs for 10,000 manufacturing firms from this year, taking up to 25% off their electricity costs, and decoupling will reduce electricity prices for both businesses and households. When those contracts for difference come in, that will have a direct impact, but in the meantime the higher electricity generator levy that is coming in this year will provide revenues so that the Government can help cushion this shock for businesses and families.

I plan to let this statement run only until 2 o’clock. Many Members are still standing, so short questions and perhaps short answers would be very helpful in allowing me to get in as many as possible.

My hon. Friend is absolutely right. This is not our war—we chose not to join it, unlike the Conservative and Reform parties, which were egging us on to do so. However, we do need to become less exposed to global fossil fuel markets. That is why we passed the Planning and Infrastructure Act 2025, which will enable us to build the energy infrastructure we need. It is why we signed off Sizewell C and a fleet of small modular reactors; it is why we are giving planning permission to solar farms; and it is why we have ended the effective moratorium on onshore wind—the cheapest form of electricity—to keep prices down for families, businesses and pensioners.

The Chancellor said in her statement:

“Every choice I make will be about keeping costs down for families and businesses”.

However, when I speak to small business owners on high streets across my constituency of Twickenham, Teddington and the Hamptons—especially café and restaurant owners—they tell me that the soaring energy and food prices that are a result of war are only compounding the pain they were feeling as a result of the Chancellor’s choices to hike national insurance for employers and, in some cases, double their business rates. What action will she take this month and this quarter, not in a year’s time, to help those businesses stay afloat? We need them to stay open for the sake of our communities.

The best thing we can do as a Government is to keep inflation and interest rates down. Since I became Chancellor, wages have risen faster than prices in every single month, giving people more money to spend, and interest rates have been cut six times—which will benefit all of our constituents, but those in London perhaps most of all, given that house prices are more expensive in places such as Twickenham—putting more money in people’s pockets. Today’s announcement about the British industrial competitiveness scheme will take up to 25% off energy bills for 10,000 businesses from this month, and decoupling will help all businesses with their energy costs. The electricity generator levy will bring in money this year, and then the new contracts for difference will reduce volatility and price spikes for all businesses.

In my constituency, I hear from many small businesses that are worried about rising energy bills and what that means for their ability to grow and create jobs. As such, I welcome the measures that the Chancellor has outlined today, particularly decoupling gas and electricity, which will help to safeguard my constituents from these international spikes. However, everyone in this situation has to play their part. The Government are doing their bit, but could the Chancellor set out what conversations she is having with the energy companies themselves on how they can further support businesses with their energy costs at a time of global instability?

I thank my hon. Friend for that question, and I understand the concerns that families and businesses have about the cost of energy and the risk of second-round effects if those costs are passed on to other goods and services in the economy. That is why my focus is on keeping interest rates and inflation down for everybody, and it is also why we are working to de-escalate this conflict. We are also working with energy companies to ensure that people who are struggling with energy debt, for example, are supported, and that people are not taken off contracts.

On 3 March, during the Chancellor’s vacuous spring statement, I raised with her that the war which had just started in the middle east would have an inevitable and immediate consequence for energy prices. I asked her what she was going to do about it, and she said that she had no plans to do anything about it. Today, the Chancellor comes to the Chamber like the coo’s tail, talking about fiddling about with contracts for difference next year while my constituents are currently paying nearly £2 a litre for diesel. In Ireland, the Government spent €750 million to support farmers, hauliers, agriculture, fisheries and household energy bills. If the Chancellor were to do the same, the figure would be £8 billion. Where is the £8 billion for our communities, Chancellor?

In the past two weeks, we have announced up to 25% off energy bills for 10,000 manufacturers, starting this month. Today, we have announced tiebacks to exploit more of our energy resource in the North sea, which has been welcomed by OEUK, and we have announced an increase in the electricity generator levy to bring in money to help with the costs of energy. We are one of the few countries in the world where energy bills went down in April, because of the decisions that I made in my Budget. Since I became Chancellor, wages have risen by more than prices in every single month and interest rates have been cut six times. That is the difference we are making. It would be nice if the SNP used the record funding we have given it to cut NHS waiting lists, rather than seeing them rise and rise.

I thank the Chancellor for her statement and her nimble response to the energy shock, including support for heating oil consumers, who make up half the households in Na h-Eileanan an Iar. The future of energy security is not an either/or. We must pursue renewables with a community share in the wealth of wind, and we must use the tiebacks that she detailed to exploit existing licences in the North sea fully. Will the Chancellor encourage other Ministers to match her commitment by hastening the review of Jackdaw and Rosebank? That would not just ensure energy security, but send a message to workers that we are with them in the North sea and the wild Atlantic for years to come.

My hon. Friend is absolutely right that we need a balanced energy policy. While some parties oppose renewables, some parties oppose nuclear and some parties—oh, they have gone—oppose any oil and gas, this Government have a balanced energy policy. We are investing in new nuclear—small modular reactors and Sizewell C; we are investing in renewables—solar and onshore and offshore wind; and we are ensuring a bright future for North sea oil and gas. That is why today we set out our policy and more detail on tiebacks. It is also why, in the not-too-distant future, the Energy Secretary, in a quasi-judicial way, will make a decision on Jackdaw and Rosebank after the courts quashed the previous Government’s decision.

We welcome the Government’s announcement on cutting the link between wholesale gas and electricity prices, which will help to shield families across the UK from volatile fossil fuel prices. They are using the very measure that the Liberal Democrats proposed more than a year ago. It is now time to go further and faster to fix a broken energy market that results in households and businesses that are powered by solar and wind not having cheaper energy bills, and even having to pay on their energy bills to turn off wind farms in British waters. I have written to the Chancellor and the Secretary of State for Energy Security and Net Zero. Will the Chancellor meet me to discuss our proposals to accelerate reforms, bring down energy bills and secure our energy supply?

I agree with the hon. Lady about decoupling. We are using an increase in the electricity generator levy to bring in money immediately and to incentivise companies to move on to contracts for difference. In terms of having to pay when solar and wind cannot be used, what the hon. Lady says would be a little more plausible if the Liberal Democrats had not sat on their hands during consideration of the Planning and Infrastructure Bill. That legislation will enable the energy infrastructure to be built that will bring electricity to people’s homes, lower people’s bills and give us the energy security that we want to see.

The Chancellor will know that AutoTrader announced last week that, for the first time, the average cost of a new electric vehicle has fallen below the average cost of a new petrol vehicle. There has never been a better time to switch to EVs. Can the Chancellor elaborate on how these targeted announcements, and some of the changes she is making today, will support the switch to electric vehicles?

My hon. Friend makes a good point. There are a couple of things we are doing today to make it more cost-effective to get an electric vehicle. First, the decoupling of gas and electricity prices will mean that electricity prices will not be set by high gas prices. That reduces the costs of filling up an electric vehicle with electricity. We are also making it easier for people to install electric vehicle charge points, including on their streets and in their homes. We are making solar panels more available, including in high street shops, to enable people to benefit from that cheap electricity, which they can use to power their homes and their cars.

Kevin Brewer is a domiciliary care worker from Northern Ireland. He says that he loves his job, but he drives 70 miles every day. He told the BBC this week that for the first time he considered phoning in and saying that he could not do his job. In the end, he decided to put the cost of the fuel on his credit card. Chancellor, people are suffering across the country. I invite her to meet people such as Kevin at the national fuel tax protest on Whitehall on Monday, where motorists, white van men and women, care workers and many others from across the United Kingdom will come together to ask her to take action now to cut VAT on fuel and to say that she will not increase fuel duty in September.

Fuel duty was never lower in the 14 years when the right hon. Gentleman was a Conservative Member of Parliament than it is now. As I have said on numerous occasions, we are keeping fuel duty under review. The best way to reduce costs for people who are reliant on their cars is to de-escalate this conflict, which is the exact opposite of Reform UK’s policy. It wanted to join in this conflict and said when the conflict started that we should stand with America. I do not agree that we should be standing with America; we should be standing up for our own country and families and businesses in our country.

It is important that we look at long-term measures such as decoupling gas and electricity prices, because we know that previous temporary measures have not stopped our exposure to these shocks, leading to further insecurity for residents and businesses. Can the Chancellor say how quickly households and businesses such as textile manufacturers in Huddersfield will benefit from this new pricing model? Can she say a little more about accelerating vital grid infrastructure?

I thank my hon. Friend for raising the concerns of people in Huddersfield. From this month, we are helping 10,000 manufacturing businesses in the industrial strategy sectors with the cost of electricity, reducing it by up to 25%. Today, we have announced that we are increasing the electricity generator levy, which will bring in more money to the Exchequer. We can use that money to help people with the costs of this war which we did not start, but of which people in Huddersfield, Leeds and around the country are feeling the consequences.

On heating oil, members of the Chancellor’s Treasury team have been keen to point out that the small amount of funding—the equivalent of about £35 a household—was just the first step. Can she outline when the next step will come to support houses that are dependent on heating oil?

We were pleased to be able to announce tens of millions of pounds to help people with the cost of heating oil, in the same way that we brought down gas and electricity bills for families and pensioners across the UK because of my Budget decisions last year. It is important that local authorities now make sure that that money is available to people. We heard from my hon. Friend the Member for South Norfolk (Ben Goldsborough), for example, that 60% of applications in Norfolk have not been processed. We need to make sure that that money gets to the people who need it. As I have said, we will keep additional support under review. The best way to bring down bills for families, businesses and pensioners—the hon. Gentleman’s party agrees with this—is to de-escalate this conflict and reopen the strait of Hormuz. That is why our diplomatic policy is so important.

According to modelling from the National Energy System Operator, gas will still set the price of electricity 30% of the time by 2030, despite most of the energy being produced from renewables. Solar and wind are far cheaper than other forms of energy, and it is right that households across the UK, and in Derbyshire Dales in particular, can benefit from the lower prices. Will the Chancellor therefore outline what steps she is taking to decouple the price of renewables from the price of gas and to drive down energy prices for homes in Derbyshire Dales?

This is the second energy price shock caused by a lack of availability of oil and gas in just four years. It shows that we need to invest more in home-grown energy to ensure security of supply and price to help people in Derbyshire Dales and right across the country. That is why we are increasing the electricity generator levy. We are using that money to help people now, but crucially as an incentive to get electricity providers on to contracts for difference, so that we do not have to pay more for electricity just because the price of gas is high.

The Chancellor said that we did not start this war and have not joined this war, and the reason for that is that this war is illegal. Iran never posed an imminent threat. Pakistan has taken valiant steps to negotiate a deal, which led to Iran opening the strait of Hormuz, but unfortunately and absurdly, Donald Trump is blocking the strait, causing a major economic crisis for everyone. I welcome the 5p cut in fuel duty and the £150 reduction in energy bills, but the reality is that they are having an insignificant impact on families, especially vulnerable families. What imminent steps will the Chancellor take to help and shield them?

I join the hon. Gentleman in paying tribute to Pakistan for the work that it is doing to de-escalate this conflict by hosting peace talks. I would expect all Members of the House to urge all parties to return to those negotiations as quickly as possible, so that we can end the bloodshed but also ensure that bills come back down for families and prices fall at the pumps. We are already taking action to reduce household energy bills through the help with heating oil. Today’s announcements on decoupling and tiebacks, and last week’s announcement on reducing business energy costs through the BIC scheme, are all things that we are doing to help families and businesses with the cost of electricity.

Does the Chancellor agree that economic security, energy security and national security all go hand in hand, which is why home-grown lower-carbon power that we control is so important? Can she tell us more about how small modular reactors, which are being delivered by Rolls-Royce and are backed by this Labour Government, will play their part in delivering power, security and good British jobs?

It was great to meet Rolls-Royce apprentices with my hon. Friend in Downing Street last week to see what difference this Government’s investment in small modular reactors through the National Wealth Fund will make. The investment in nuclear is creating good jobs that pay decent wages, providing export opportunities through this new technology and, crucially, giving us energy security on both supply and price.

Just so the Chancellor is aware, my constituents in Lagan Valley did not get £150 off their electricity bills. I am sure the Chancellor knows that that is because Northern Ireland is not in the same electricity market as the rest of the UK. Even if we add together the sums that we received through the Barnett consequentials, they do not total £150. We hope that her lack of knowledge does not reflect the importance of Northern Ireland when this Government come to tackling the cost of living crisis. When will the Chancellor meet my colleagues in the Northern Ireland Executive to discuss how to help us through this crisis?

Northern Ireland benefited from the Barnett consequentials, with the money going to the Northern Ireland Executive. As the hon. Lady says, Northern Ireland is in a different electricity market. At the same time, we listened carefully to what MPs and Members of the Northern Ireland Executive said about Northern Ireland’s exposure to heating oil. When we made the support available, we did so through local authorities and locally, rather than as a national scheme, recognising the higher exposure to heating oil in Northern Ireland than anywhere else in the country.