Sunday, June 26, 2022

Living crisis: what kind of help does Rishi Sunak announce and when?

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Rishi Sunak is poised to announce billions of dollars in aid to people struggling with massive price increases on essential goods.

The chancellor is expected to unveil more support this week after coming under heavy pressure from all sides of the political spectrum.

He had resisted calls to spend more money, arguing it would be “stupid” to do so now if energy bills didn’t start rising again until October.

But Sunak was forced to act as the crisis deepened and the multi-millionaire chancellor was increasingly viewed as “out of touch” with the issues facing ordinary voters.

When will help be announced?

Reports suggest an announcement is imminent and could come on Thursday. The Chancellor had preferred to wait until later in the summer, but events have forced him to take more urgent action.

Signs for the economy are deteriorating, with consumer confidence hitting an all-time low and businesses cutting back on investments while warning orders are drying up.

Announcing help now could give people who fear for their financial situation certainty and thus help the economy as a whole.

What can be announced? – a windfall tax

Labor is urging the government to introduce a one-off tax on North Sea oil and gas producers, which are among those who have benefited from sharp price increases this year.

The Labor Party estimates the tax could raise £1.2billion for the Treasury, which could be used to help people struggling with rising living costs.

That figure is just a small fraction of the extra costs the Brits will hit this year.

According to the Chancellor, however, the idea was cold The timeshe now wants to introduce a much broader tax on energy producers, including wind farm operators, who have benefited from high prices.

The tax would reportedly target £10bn in “excess profits”, although it’s unclear how much it would raise for the Treasury.

Overall, the government is believed to be considering a spending package of up to £10bn.

The government needs to spend £15billion to help those on lower incomes through the crisis, according to the Resolution Foundation think tank.

Energy bill subsidies

Sunak could use proceeds from a windfall tax to better a £200 cut in energy bills he announced earlier this year.

The cut has been criticized because the money saved will be reclaimed through a bill levy of £40 a year for the next five years.

Nor is it aimed at those on lower incomes, who are hardest hit by rising living costs.

The Chancellor could convert the cut into a non-repayable grant. Or he could increase the discount people get.

Increase the warm home discount

The Treasury is reportedly trying to make the existing warm house rebate program more generous.

It offers three million lower-income households a £150 reduction on their bills, but this could increase to as much as £500 or £600.

That would be expensive for the government, but would have the advantage of being much more targeted.

Increase in universal credit

Increasing benefits would be the easiest way to get money to the right people.

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