Liz Truss and Rishi Sunak have clashed over their plans to tackle the cost of living crisis. Left image: Simon Dawson / No 10 Downing Street. Right image: Andrew Parsons/ No 10 Downing Street
Liz Truss and Rishi Sunak have clashed over their plans to tackle the cost of living crisis. But experts claim neither leadership candidate is offering anywhere near enough support to help people struggling with sky-rocketing bills.
Truss has claimed she will cut taxes, reverse the national insurance hike and suspend the green energy levy. Sunak has slammed her plans, saying they “won’t touch the sides”. Instead, the former chancellor says he will offer another cost of living handout.
So what do experts think of the leadership candidates’ proposals? Sam Tims, of the New Economics Foundation, said: “Neither leadership candidate fully grasps the seriousness and the size of the cost of living crisis.”
What do the experts think of Truss’s plans?
Plan 1: Cut corporation tax
Truss says the answer is tax cuts. The bookies’ favourite plans to cancel a planned rise in corporation tax. As it stands, 19 per cent of businesses’ profits are taxed and this rate is set to increase to 25 per cent in April 2023.
According to government estimates, scrapping the hike will cost £17bn in public funds. But Truss said it will “let people keep more of their own money” and boost economic growth.
“This is a fallacy,” Tims warned. “It does nothing for low income households.”
Peter Kelly, director of the Poverty Alliance, agreed. He said: “Tax cuts will do nothing for those who have seen their social security benefits cut, or for the millions who will fear switching on their heating this winter. Economic growth is meaningless to communities that have seen resources stripped away over the last decade.”
Plan 2: Reverse increases in national insurance
Truss’s plans to reverse increases in national insurance would cost about £13bn a year, according to the Institute for Fiscal Studies. For every £7 spent on this measure, £6 goes to the top half of earners. This will leave the “worst off exposed to price hikes for essentials”, experts at the Joseph Rowntree Foundation warned.
Plan 3: Suspend green levies on energy bills
Truss has also proposed suspending green levies on energy bills. But they only make up about £153 of average energy bills, according to Ofgem. This amount is dwarfed in comparison to the average household’s energy bills, which could soar above £4,200 by January.
What do the experts think of Sunak’s plans?
Plan 1: Another cost of living support package
Sunak’s plans don’t fare much better, according to the experts. The former chancellor is promising another cost of living support package. As chancellor, he announced £1,200 would be given to each low-income family to help them through the crisis. Sunak has refused to say how much support he would be offering households.
Tims claims: “His track record shows that low-income households would still be left to cover the large gap that remains after any further support.”
Kelly adds: “The support packages introduced earlier this year were welcomed, however they will not go nearly far enough to provide protection from this tidal wave of poverty nor undo the injustice of underfunding and attacking our social security system over the past decade.”
Plan 2: Cut income tax
Sunak has said he will cut the income tax by the end of next parliament. As chancellor, he announced the tax would come down from 20p in the pound to 19p in the pound by April 2024. He has now said he will cut a further 3p by the next parliament, expected to be in 2029.
But, again, Tims says this “does nothing for low-income households”, adding that the top 20 per cent of earners gain half of the benefit of cutting income tax by a penny.
Plan 3: Temporary VAT cut on fuel bills
Sunak has also proposed a temporary VAT cut on fuel bills. But according to the IFS, this would help those who use most energy rather than those struggling to pay their bills. It only saves the typical consumer £154 per year.
What can the leadership candidates do to tackle the cost of living crisis?
The JRF is urging both candidates to bring forward a large support package doubling the help to the worst-off families. Experts at the charity claim people will need at least £2,550 in government support to cope amid the rising cost of living.
Katie Schmuecker, principal policy advisor at the JRF, said: “Every day without a concrete plan to address this glaring gap is increasing anxiety for in low-income families who do not know how they will get through the winter.
“The public believe tackling this crisis head on is more of a priority than tinkering with tax policy. The scale of the intervention required could have been smaller if the UK’s social security system hadn’t been cut back and degraded for more than a decade, leaving many families exposed to economic shocks.
“As well as at least doubling the financial support package for people using the benefit system, a simple way to help lots of people quickly is to make debt deduction repayment rates more affordable. This would stop so many falling needlessly into further hardship.”
The Big Issue has teamed up with Gordon Brown as the former prime minister calls on the government to take urgent action to prevent a “poverty time bomb” going off in October. He is urging the government to introduce an emergency budget to help low-income households.
Tims added: “The next prime minister should align social security to the cost of living while scrapping the benefit cap, two child limit and deductions from universal credit.”
Kelly said: “They need to govern through building solidarity and compassion – and they need to put those values into action now by increasing social security benefits and limiting further energy price increases.”
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