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Treasury Committee publishes Government response to report on impact of Russian sanctions

9 June 2022

The Treasury Committee today publishes the Government’s response to its report, ‘Defeating Putin: the development, implementation and impact of economic sanctions on Russia’.

The report, published in March, warned Russia that it is heading into a deepening economic crisis, but that its invasion of Ukraine will have a significant economic impact on the cost of living in the UK. The Committee also warned that the UK is not protected from the economic consequences of sanctions on oil and gas, and that further sanctions will lead to higher prices, with knock-on effects for households and businesses.

The Committee called for the guidance issued to businesses involved in implementing sanctions to be clearer, and resource for the Office of Financial Sanctions Implementation (OFSI) to be boosted.

The report also urged further action be taken to support UK households, in particular those on lower incomes, to help manage rises in energy and other costs as the Government moves forward with its sanctions strategy.

In response, the Government confirms it is recruiting additional staff to OFSI, which is expected to at least double in size over the next financial year. It also commits to continue monitoring the ongoing impact of Russia’s invasion of Ukraine on the UK economy, saying that it will be ready to take further steps to support households if needed.

Chair's comments

Commenting on the response, Rt. Hon. Mel Stride MP, Chair of the Treasury Committee, said:

“Russia’s invasion of Ukraine will sadly have long-lasting consequences for the people of Ukraine, but also for us here in the UK. It is reassuring to see that the Government is committed to further sanctions on Russia and that resource will be increased for those responsible for implementing sanctions.

I urge the Government to update its guidance quickly, as businesses require the clearest guidelines possible in order to implement sanctions effectively. It is also welcome to see that additional financial support has been brought forward, as those on the lowest incomes are most likely to feel the consequences of the increasing cost of living.”

The report contained the following conclusions and recommendations:

  • The Committee deplores the illegal and unprovoked invasion of Ukraine by Russia. The Prime Minister was right to insist that the UK, alongside its international partners, implement stringent economic sanctions against Russia.
  • The sanctions against Russia are without precedent given the size of its economy and its integration with the West. The Committee is concerned that guidance for those who have to implement sanctions has appeared to have lagged behind that available in the United States. The Government must, as a priority, ensure that its guidance is clear, precise and readily available, to allow the effective implementation of sanctions across the private sector.
  • The Government needs to consider increasing the Office of Financial Sanctions Implementation's (OFSI) resources without delay and to provide surge capacity in the form of staff with appropriate expertise.
  • There will be a cost to the UK economy of the economic sanctions imposed on Russia. It is not possible yet to quantify that cost, but the Committee believes that, on the information currently available, it is most definitely a cost worth bearing in order to aid Ukraine in opposing Russian aggression. However, that cost, combined with the already present pressures in the UK on the cost of living, will impact the whole country, and will be felt particularly by low income households.
  • As the Government moves forward with its sanctions strategy, it must take further action to support UK households - in particular those on lower incomes - to manage the subsequent rise in energy and other costs.

Further information

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