Social Justice

What new chancellor Nadhim Zahawi can do to tackle the cost of living crisis

Poverty experts and charities have wasted no time in calling for the chancellor to come up with new strategies to tackle the cost of living crisis.

Cost of living/ Image of chancellor

Nadhim Zahawi is tasked with tackling the cost of living crisis as the new chancellor. Image: Dean Calma/ IAEA/ Flickr

The shock resignation of chancellor Rishi Sunak comes as the UK faces a cost of living crisis and the highest inflation rate in 40 years. The man replacing him, Nadhim Zahawi, is now tasked with sorting that out. 

The new chancellor said his priority is to “rebuild the economy post-pandemic and to get growth going again”. Speaking on Sky News on Wednesday morning, he said he is “determined to do more” to cut taxes. 

But experts and charities have wasted no time in urging the new chancellor to come up with a plan to prevent poverty and stop people going hungry.

Neil Cowan, policy and campaigns manager at the Poverty Alliance, said there is a “riding tide of poverty sweeping across the country”.

He added: “The new chancellor’s first concern has to be keeping people afloat amid this economic storm, with urgent action to fix our social security system so that it can act as a lifeline for everyone who needs it. 

“Scrapping the benefit cap, ending the five week wait for universal credit, and removing the two child limit should be immediate priorities. Failing to take these steps, and continuing with the policies of recent chancellors that have locked so many people into poverty, would be a colossal moral failure.”

Zahawi’s first day on the job coincides with a £6billion cut to national insurance, resulting in lower contributions for 30 million people. But it comes after the government broke its 2019 manifesto pledge and increased the national insurance rates earlier this year, meaning millions of people have been paying more tax over the last few months. 

Poverty experts have also repeatedly condemned the government’s choice to let benefits levels fall far below the real cost of living. In April, benefits increased by just 3.1 per cent while inflation is currently at a record-high of 9.1 per cent. It was the single biggest cut in the value of basic unemployment payments for 50 years.

Peter Matejic, chief analyst at the Joseph Rowntree Foundation, said: “The new chancellor has the opportunity to get on the front foot and stop this government lurching from crisis response to crisis response. 

“With those on the lowest incomes already struggling after a decade of cuts and freezes to benefits, he must urgently address the fundamental inadequacy of our social security system. An immediate first step the chancellor can take is to stop the government deducting debt repayments from benefits at unaffordable rates.”

The JRF claims “the government is causing severe hardship by using the benefit system to collect some debts”. It is calling on the government to let families pay back their debt more slowly instead of deducting those funds from their benefits.

The government has announced that over eight million families on benefits will receive an initial cost of living payment of £326 on July 14. A second instalment of £324 will be sent to qualifying low-income households in the autumn. But experts are urging Zahawi to think beyond the emergency payments. 

Adam Corlett, principal economist at the Resolution Foundation, said: “The new chancellor will need to assess whether further emergency support is needed if high inflation stays with us for longer than expected. 

“But he also needs to take a longer-term perspective on the economy, and devise a new economic strategy that delivers the stronger growth that Britain has lacked for far too long. Doing that means addressing our failure to raise pay and productivity levels, as well as building on Britain’s strengths as a services superpower.”

Economist Lukasz Krebel, of the New Economics Foundation, added: “The new chancellor should reform social security by increasing the current level of support, and provide everyone with a living income in the longer term. This would include increasing benefits above inflation to reverse earlier cuts and to align payments with the cost of living, scrapping the benefit cap, and removing the two-child limit from universal credit and tax credits to help larger families. 

“The treasury should work with the Bank of England to support a ‘Great Homes Upgrade’ – a national retrofitting effort to insulate millions of homes in the next three years – providing public grants and zero per cent interest loans. This would help tackle inflation, which is in part driven by our reliance on expensive gas, and lower energy bills for good.”

Gavin Rice, policy director at the Centre for Social Justice, added: “The incoming chancellor should do everything in his power to reduce the cost of energy bills, including exploiting new domestic sources of energy and removing green levies from household bills.

“The pandemic saw the numbers claiming universal credit skyrocket. The chancellor should ensure that universal credit properly supports the poorest while also ensuring that he prioritises moving those who are able to work into the record number of vacancies, as being in work is the best defence against the rising cost of living.”

Support the Big Issue

For over 30 years, the Big Issue has been committed to ending poverty in the UK. In 2024, our work is needed more than ever. Find out how you can support the Big Issue today.
Vendor martin Hawes

Recommended for you

View all
Almost no recorded cases of disability benefit fraud despite DWP crackdown: 'PIP fraud is a non-issue'
dwp pip/ disabled person
Disability benefits

Almost no recorded cases of disability benefit fraud despite DWP crackdown: 'PIP fraud is a non-issue'

Deaf man awarded £50,000 after 'oppressive' and 'discriminatory' treatment by DWP
dwp jobcentre
Department for Work and Pensions

Deaf man awarded £50,000 after 'oppressive' and 'discriminatory' treatment by DWP

The UK used to be the most LGBTQ-friendly place in Europe. Now, it's not even close
LGBTQ+ rights

The UK used to be the most LGBTQ-friendly place in Europe. Now, it's not even close

'We're at breaking point': Food banks see record number of first-time users as demand soars
food bank
Food banks

'We're at breaking point': Food banks see record number of first-time users as demand soars

Most Popular

Read All
Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits
Renters: A mortgage lender's window advertising buy-to-let products
1.

Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal
Pound coins on a piece of paper with disability living allowancve
2.

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal

Cost of living payment 2024: Where to get help now the scheme is over
next dwp cost of living payment 2023
3.

Cost of living payment 2024: Where to get help now the scheme is over

Strike dates 2023: From train drivers to NHS doctors, here are the dates to know
4.

Strike dates 2023: From train drivers to NHS doctors, here are the dates to know