Rishi Sunak’s cost of living support won’t be enough for struggling families, charities warn
Plans outlined by the chancellor include a windfall tax, help with energy bills and support for vulnerable households. But is it enough?
by: Marcus Wratten
26 May 2022
The chancellor Rishi Sunak. Image: Tim Hammond / No 10 Downing Street
Experts are warning that the £15billion measures announced by chancellor Rishi Sunak will not be enough to curb the cost of living crisis for Britain’s most vulnerable families.
Speaking in parliament, Sunak unveiled a package of support for families affected by rising costs, including upping the £200 discount on energy bills to £400, and scrapping the need to repay it.
Plans also include a “temporary, targeted profits levy” — otherwise known as a windfall tax — on energy firms. The tax will have an investment allowance, acting as an incentive for energy companies to reinvest the profits they make.
Sunak, addressing MPs, acknowledged the cost of living crisis is “causing acute distress for people of this country.”
Eight million families struggling through the crisis on low incomes will receive a one off ‘cost of living payment’ of £650 from July, set out in two instalments.
Eight million pensioners, who receive the Winter Fuel Payment, many of whom are disproportionately impacted by the rise in energy prices, will receive a cost of living cash boost of £300.
However, charities have said the payment simply won’t be enough to help families on the lowest incomes, as they struggle with sky-high food costs and surging energy bills.
Imran Hussain, director of policy and campaigns at Action for Children, said that while he was “pleased the chancellor has listened,” more action is needed.
“The measures announced today will help, but won’t fully shield families with children from the pain they’re experiencing,” he said. “Ultimately, we need a stronger social security system to ensure all families with children can meet their basic needs.
“With nearly four million children in families on universal credit, increasing the child element of this benefit would protect more children from growing up in desperate hardship and help give them the bright futures they deserve.”
Six million people living with disabilities, who receive support through disability benefits, will receive an additional one-off payment of £150.
James Taylor, director of strategy at disability equality charity Scope, noted the importance of Sunak recognising the additional cost of living for people who are disabled.
“This package is a significant short-term boost to disabled people whose backs are against the wall,” he said.
“But inflation and energy prices are still running riot, and disabled people are much more likely to live in poverty. Even before the cost of living crisis, disabled people were facing extra costs of almost £600 a month.”
“The chancellor needs to continue to use the benefit system in the long term to target support at disabled people where it’s needed most. The Government must also make sure that no disabled people fall through the gaps in receiving the support needed to get through this winter and beyond.”
Alison Garnham, chief executive of the Child Poverty Action Group, said the measures were a “good start” but criticised the fact that they are only a temporary solution.
“With almost four million children living in poverty the chancellor is kidding himself if he thinks that the problem is temporary or that the package he offered today will stop people finding themselves so far back that they never recover,” Garnham said.
“If the chancellor is serious about supporting those who are struggling then he will need to make long-term changes to the structure of the social security system and restore the value of benefits to something that families can really live on.”
This concern around the measure only being a temporary fix was echoed by Rachel Statham, the associate director for work and the welfare state at the Institute for Public Policy Research.
“We need to see support that can keep families afloat not just this year, but into the future. Today’s measures offer temporary relief, but any long-term solution must ensure our social safety net is fit for purpose,” she said.
The Joseph Rowntree Foundation said that the most effective support for families on the lowest incomes should come in the form of uprating benefit payments in line with rising inflation.
Currently, benefits including universal credit and job seeker’s allowance are only increased to match the rising cost of living once a year, in April, to match the inflation rate of the previous year. This means that payments won’t increase until April 2023, despite September’s inflation rate expected to hit 10 per cent, according to the Bank of England.
Sunak resisted calls from charities to increase monthly benefit payments, with the Treasury previously saying that “technical constraints” prevented an early rise. He said that benefits would be uprated next year, in line with September’s inflation rate.
Joseph Rowntree Foundation’s chief executive Paul Kissack said the package would be a “welcome relief” for those most impacted by the crisis.
“It is right to target help at those on low incomes, who are least able to bear the shock of soaring energy bills,” he said.
“We are pleased by the commitment to uprate benefits in line with inflation as usual, though it is still crucial that the government invests on an ongoing basis in ensuring that everyone can get through difficult times and afford the essentials.
Charity Citizens Advice has previously called for a return of the £20-per-week uplift of universal credit, which was brought in to support families facing hardship during the pandemic.
The organisation today said that 46 per cent of its debt clients are unable to make ends meet, up from 36 per cent in 2019.
Derek Mitchell, the chief executive of Citizens Advice Scotland, said the support was a welcome, but emphasised that many will still struggle in coming months.
“Those on low incomes are still going to feel a significant squeeze on their household budgets and no one should be in any doubt about what that means – people choosing between feeding their children or keeping them warm,” he said.
Following Sunak’s announcement, Labour’s shadow chancellor Rachel Reeves said that he “has finally realised the problems the country is facing”.
She criticised the Tories for failing to announce the windfall tax sooner, a policy that Labour had demanded for some months.
Reeves also pointed out that the “buy now, pay later” energy discount scheme was “always destined for failure”.
“Let there be no doubt about who is winning the battle of ideas in Britain — it is the Labour party,” she said. “For months, it has been clear that more was necessary to help people bring their bills down. So what took this government so long?
“We pushed for the windfall tax. They’ve adopted it. We said the buy now pay later scheme was wrong. Now they’ve ditched it. This government is out of ideas, out of touch and out of time,” she added.
Money expert Martin Lewis called the removal of the need to repay the £400 energy bill reduction a “good move,” and said that the package was more generous than he had imagined.
This morning, Lewis said that in a call with Sunak on Monday, he had asked for a “rapid mid-year inflation catch up increase” to support those who need assistance most, as well as targeted support for families whose bills are inflated due to costs associated with disabilities.
On Tuesday, Ofgem said that the cost of energy bills would rise by a staggering £830, or 42 per cent, in October. Bills had already increased by nearly £700 in April.
Results of a YouGov poll released on Thursday indicate that more than one in five Britons are now struggling to make ends meet, up from 10 per cent last year. Half of households say that their financial situation is worse now than it was last month.
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