LONDON (Parliament Politics Magazine) – According to government insiders, Rishi Sunak is believed to take some limited action to address the cost of living crisis in the spring statement of this month, but will resist calls to expand his energy bill reduction scheme which was much-criticised.
The chancellor has urged Treasury officials to draw up measures for cushioning the hit for consumers, amid rising criticism from inside his own party and predictions by some City analysts that inflation may touch 10% within months.
However, Treasury sources emphasise that the government is unable to safeguard the public from what is a worldwide problem – and that the public finances were in a weaker state than they had been at the onset of the pandemic, when Sunak took drastic measures such as the furlough scheme.
They said that one once-in-a-generation crisis has already been dealt with, and we’ve now stepped into another. There’s just so much that can be done, and oil prices have never been this high.
One popular suggestion is to increase state benefits by more than the 3.1 percent set aside in last autumn’s budget, which would amount to a significant real-terms cut given the sharp rise in inflation since then.
Fast-rising inflation and income losses on a scale previously witnessed in recessions will be the distinguishing economic feature of the year ahead, said Torsten Bell, director of think tank the Resolution Foundation. The conflict in Ukraine has further intensified the financial strains that will be felt by households.
Other possibilities include a further reduction in the universal credit taper rate, which was reduced in the budget of October. Because of this, the claimants will be able to keep more as their earnings rise; and the unfreezing of personal tax allowances. These allowances are expected to push more people into higher tax brackets.
As the UK and other European economies transition away from Russian energy, the PM acknowledged that consumers will face difficult months ahead.Â
Now was the moment, and it may be a trying time, but we’ll get through it as quickly and efficiently as possible, he said.
On Sky News, Boris Johnson said the government would do everything it can to help households, including keeping fuel duty frozen, but that the best way for dealing with the cost of living, the big picture, he means, is to have a strong economy with good high-wage jobs.
In the midst of the crisis, former Tory Prime Minister David Cameron has urged the government to cut taxes – but, while Sunak has stated that he wants to be a tax-cutting chancellor, he remains committed to the 1.25% point increase in national insurance contributions set to pay for social care and health in April.
