Observer’s take on Rishi Sunak’s cost of living package Observer editorial

Economists and poverty activists have been warning for months that low-income families and people with disabilities will be in increasingly serious financial trouble due to inflation reach the highest 40 years level.But for months, a scandal-ridden government chose to ignore their plight, implementing universal credit cuts and enacting a package of fiscal support mostly go to wealthy familiesLabor’s call for a windfall tax on energy companies to fund more financial relief has gone unanswered.

In the end, the principal relented and corrected the course. Last week, Rishi Sunak announced an additional £15bn one-off financial support for families, Partially funded by £5bn windfall profits tax About energy companies.Came too late, causing unnecessary hardship and stress to low-income families more generous package Better than anything before, albeit not perfect, but aimed at those who need support the most.

All energy bill payers will now receive a £400 grant instead of Initially announced £200 repayable credit by the Prime Minister.In addition, a one-off payment of £650 will be made to all 8 million households receiving means-tested benefits, including Disability and pensioners receive an extra £150 and £300.

Analysis by the Resolution Foundation highlighted that of the two previous sets of cost-of-living support from the chancellor, 6 out of 10 pounds went to households in the top half of the income distribution. The new set of measures helps to rectify the problem: two-thirds of the £15bn goes to households in the bottom half of the allocation.Given the unbearable choices some low-income parents now face – food banks warn some Kids are getting food poisoning With parents turning off refrigerators and wearing dirty clothes to school in order to save on electricity bills – the scheme should have been skewed more towards those for whom inflation is the most existential crisis.

However, there are some problems with the implementation of these measures. With a long-standing refusal to introduce support of this magnitude, the Prime Minister has not only left some families in distress and uncertainty for longer than needed, but he has also missed an opportunity to provide that support by raising benefits more generously (Benefits will be reduced by about 5% In real terms for the year due to not keeping pace with inflation). Using flat-rate payments to compensate for such benefit cuts is a blunt tool that has the downside of penalizing lower-income families with children, who are more costly.

It further undermines the principle firmly established under Labour that there are too many low-paid jobs to support families in economies with very high house prices and that the government is right to support low-paid parents financially. . A considerable number of families, especially those with children, living in more expensive parts of the country for housing, will miss out on the flat rate payment entirely because it would put them over the benefit capdid not increase with inflation.

Another fundamental problem with these measures is that, despite the above arguments, they are only one-time payments to compensate the least affluent households whose cost of living has risen this year. Many households were already in very difficult financial situations before this year due to the cumulative cuts in tax credits and benefits rolled out by successive Conservative prime ministers since 2010, even though they are enacting costly tax cuts that have left more wealthy families have benefited greatly.Families with children bear the burden of these cuts, with thousands of pounds less a year compared to 2020 support they would have been eligible for year 2010. The one-time payment has not even begun to address this structural erosion of the financial safety net for low-income parents, which has led to a chronic decline in living standards, leading to an increasing number of parents relying on food banks to support one of the richest countries in the world. their children.

In addition to the current crisis, the country needs an economic growth strategy to reduce regional inequalities exacerbated by Brexit and address the UK’s productivity crisis, which is driving down real wages, and a housing construction public Investment programs reduce housing costs for renters. But it’s a government battered by constant scandals, led by a prime minister who has held on despite being fined by police for breaking the law in order to socialise during a state of emergency. Last week, Boris Johnson rewrote the ministerial code to water down his sanctions and thereby codified the disintegration of integrity and integrity he presided over.

The emergency support package was better than many had expected, given the Prime Minister’s rhetoric in recent weeks. But this is not a government capable or inclined to address the structural causes of unacceptable levels of child poverty affecting our country.