The cost of living has become one of the main political focuses as bills rise and inflation rises as households experience tensions.
Average energy bills rose by nearly £ 700 to just under £ 2,000 a year in April, and the Bank of England expects a new annual increase of £ 830 in October.
The government has said its priority is “to help reduce the cost of living” and has already introduced some measures, but critics – including some Conservative lawmakers – say they could do more.
Sky News discusses some of the options that have been offered to the government.
Deputy political editor Sam Coates provided his analysis of each measure in gray boxes.
Contingency tax
Labor has called for an unforeseen tax on the oil and gas companies’ excess profits to give households some relief on their energy bills.
This will include a one-off tax on the profits of companies that have been stimulated by high energy prices, with BP acknowledging that there is “more money than we know what to do”.
So far, Chancellor Rishi Sunak has opposed the calls, but said “no option is on the table”.
Some conservative lawmakers are calling for the chancellor to introduce the tax.
But Boris Johnson said he was reluctant to introduce an unforeseen tax, as companies were better off investing in renewable energy.
He is also concerned that this could hamper investment in the North Sea, as the UK is trying to become more self-sufficient.
Oil and gas companies are also already paying higher corporate taxes than most other companies – 30% versus 19%.
Sam says …
This is creeping up on the government’s agenda, despite the Tories’ historic antipathy to taking away private sector profits. Cabinet ministers like Kwasi Kwarteng are still publicly opposed, so there is some way to do that if that happens.
Read more:
The decline in real wages is intensifying as inflation hits incomes – but unemployment is at its lowest level since 1974.
Can you make your way through the inflation crisis?
Please use the Chrome browser for a more accessible video player
1:39 Get a “better paid job” for protection
Eliminate the increase in national insurance
On April 6, social security contributions were increased by 1.25 percentage points to 13.25%.
This means that someone who earns £ 27,000, for example, now pays £ 200 more in national insurance per year.
Labor has called on conservatives to reverse the increase as families struggle with the cost of living, and said it would replace the increase with an unforeseen tax on oil and gas companies.
Employers’ groups also criticized the increase, with the British Chambers of Commerce saying it was another pressure on spending “at a time when they can’t afford it”.
The government has opposed calls to reverse the rise, with Mr Johnson saying the rise would help the NHS cope with the backlog of the pandemic.
Sam says …
Many Tory MPs want the tax increase removed, but Boris Johnson wants it to pay for welfare and Rishi Sunak wants it to balance accounts after this new spending commitment.
Reduction of income tax
The chancellor said he would reduce the basic income tax rate from 20 to 19 pence a pound before the spring of 2024.
But that has not yet happened, as Mr Sunak said in March that “it would be obviously irresponsible to fulfill this ambition this year” due to the economic situation.
However, Paul Johnson, director of the Institute for Fiscal Research (IFS), said the increase in the national insurance rate, while lowering the income tax, “bridges the gap between taxation of unearned income and earned income.”
Sam says …
Rishi Sunak has already promised to cut income taxes before the next election. However, this does not help the lowest income categories that are below the threshold and do not pay income tax or have a fixed income as retirees.
Image: Rishi Sunak said “all options are on the table”
Increasing universal credit
Labor has been calling for some time for the government to reinstate the £ 20-a-week increase in Universal Credit introduced at the start of the pandemic to help low-income people.
Conservative colleague and Asda chairman Stuart Rose has joined other prominent business figures, including Tesco chairman John Allen, in calling on the government to help families struggling.
Lord Rose said lower-income people were particularly concerned and believed that direct, targeted social assistance was the best approach.
Mr Sunak said the computer system of the Ministry of Labor and Pensions had prevented him from raising benefits in the spring statement, as it would allow only one increase a year.
Sam says …
The best targeted way to help those in need, but it contradicts Boris Johnson’s rhetoric about increasing employment and getting better paid jobs, which is ultimately the way out of the cost of living crisis.
Follow the daily podcast of Apple Podcasts, Google Podcasts, Spotify, Spreaker
Regulatory changes
Boris Johnson instructed his cabinet to devise ways to ease tensions over people’s finances without using taxpayers’ money.
Ministers are said to be considering options, but nothing concrete yet.
They include:
• Allowing motorists to receive MOT tests every year, not every year
• Loosen the legal requirements dictating the number of employees needed for the number of children in childcare facilities to allow more children per adult
• Assisting farmers with rising fertilizer costs in hopes of reducing food and beverage prices
• Raise awareness of discounted broadband offers for low-income households, which are available to 4.2 million Universal Credit households, but less than 2% say so.
Sam says …
All such provisions – such as the annual roadworthiness tests and the ratio of crèches to crèches – have been introduced for some reason, so that ministers are on the political hook if their removal creates problems and endangers lives.
Add Comment