Spring Budget: Four things the Chancellor could announce to tackle the cost of living crisis

Rishi Sunak’s Spring Budget announcement on March 23 could not come at a more vital time.

The disruption from the Covid-19 pandemic is still being felt across the economy and the invasion of Ukraine is adding greater instability.

The cost of living crisis driven by surging energy bills, higher taxes and rising housing costs is set to stretch household budgets to breaking point. Only decisive action from the Chancellor this week can intervene.

Here are four big issues he can tackle to help people struggling to get by.

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1. Money: More is needed Rishi Sunak must raise universal credit by more than 3.1 per cent

You know things are bad when you’re being told to do the same thing by economists on the left and the right of the political spectrum. That’s what Sunak is facing when it comes to benefits – not least because the rise was calculated in September based on inflation at the time. The Bank of England has predicted inflation will rise above seven per cent next month, and the Joseph Rowntree Foundation reckons if the benefit increase stays as it is, nine million low-income households will be impacted – to the tune of £500 a year.

The Resolution Foundation says only drastic action will allow people on low incomes to maintain their living standards. The think tank wants to see Sunak hike up the increase another five per cent to 8.1 per cent – and says all measures announced so far to support households with energy bills and benefits could be wiped out by the soaring cost of living if he doesn’t. The right-leaning Centre for Policy Studies has also stated the government should raise benefits by more than the planned amount – a cost it could retrieve by reducing the increase next time.

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It’s also been the focus of Jack Monroe. The campaigner has been drawing attention to the issue both in and out of Westminster in recent weeks. She even convinced Asda to increase stocks of their Smart Price value range to tackle rising food prices, which are expected to rise by £26 a month on average for families.

That unprecedented unity has extended across the charitable sector too. Last week an open letter was signed by a who’s who of charities including the Child Poverty Action Group, Citizens Advice, Save the Children UK and Trussell Trust among others urging Sunak to act. Failing to do so will push families beyond breaking point, the charities warn.

2. Energy: Bills surge is set to hit those on pre-pay meters – they need targeted support

The Westminster government has already announced a £200 reduction in energy bills to combat the £693 energy price cap rise in April, but another price rise is on the way in October.

The energy bills crisis is also set to be exacerbated by the war in Ukraine, and customers on pre-pay meters are likely to be hit hardest, with the Fuel Bank Foundation warning they could be paying £428 a month by January 2023. People who pay by direct debit could see bills peak at £250 a month – a rise of £144 on current average costs.

Matthew Cole, chair of trustees at Fuel Bank Foundation, said, “Urgent consideration needs to be given by the government to extending financial support to those who need it most. For example, people who are eligible for the Warm Home Discount would be a good place to start.

“To put this into context, if annual fuel bills reach £3,000, which they realistically could, the Warm Home Discount payment would need to be around £2,000 to have any sort of financial benefit.”

3. Housing: The fund to help struggling renters is being cut – Sunak must reverse it

Discretionary housing payments (DHP) are available from local councils to help people who are struggling to cover their rent or their housing costs. A lot of households may find themselves in that position as the cost of living surges.

Last year councils had access to £140 million in the DHP pot, but in 2022/23 only £100m will be available at a time when rents are rising across the board, including a 4.1 per cent rent rise for people living in social housing.

Marc Francis, director of policy and campaigns from anti-poverty charity Zacchaeus 2000 Trust, said: “This is the worst possible time for DWP to have cut its funding for discretionary housing payments. It will force local authorities into invidious choices between helping disabled tenants affected by the bedroom tax and families hit by the benefit cap. No wonder it wasn’t publicised. Z2K hopes that, even at this late stage, the chancellor will find some extra money to reverse this cut.”

4. Environment: Act now to fix 19 million draughty homes

The cost is not the only thing that impacts energy bills – efficiency counts too. The Architects Climate Action Network and think tank New Economics Foundation penned a letter to the Chancellor earlier this month calling on Sunak to invest £11.7 billion in fixing the UK’s 19 million draughty homes. The campaigners argue that the Great Homes Upgrade could save families at least £345 a year on energy bills, and the retrofitting campaign could also help the UK’s push for net-zero.

Sara Edmonds, coordinator at Architects Climate Action Network, said: “Our homes are responsible for around 20 per cent of UK emissions. The UK has one of the oldest and leakiest housing stocks in the world. A national retrofit strategy based on improving the fabric of our buildings is essential. Without this more people will be plunged into fuel poverty and the UK will not meet its legally binding targets to reduce emissions.”