The Times - UK (2022-05-27)

8 2GM Friday May 27 2022 | the times

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Rishi Sunak has boasted of taxing and

spending more than Labour to help

with the cost of living, as experts said

the chancellor was engaging in “serious

redistribution from rich to poor”.

The chancellor set out an “extremely

progressive” package that would fully

compensate the poorest households for

this year’s rise in energy bills. While

analysts largely backed his interpreta-

tion, there was unease on the Tory

benches at the scale of the spending.

The chancellor insisted his package

was “more generous” than anything

proposed by Labour, and compared the

windfall tax yesterday to Labour’s plan

for a levy to raise £2 billion. “The way

we have structured ours means it will in

fact raise £5 billion, which is a signifi-

cant amount of revenue,” he said.

“The vast majority of households will

receive £550, pensioners will receive

£850 and almost all of the eight million

most vulnerable households will, in

total, receive support of £1,200.”

Among the key measures were:

£400 for every household

Every home in England, Scotland and

Wales will have a £400 grant automati-

cally applied to their energy account. If

bills are paid by direct debit, the money

will be added to the account. Those on

pre-payment meters will either receive

a voucher or the amount can be applied

to the meter. This replaces previous

plans for a £200 loan.

£650 boost for those on benefits

Eight million of the worst-off homes —

those on means-tested benefits — will

be given £650, which will be put into

their bank accounts in two instalments.

The first will be from July and the

second in the autumn, but those on tax

credits will have to wait slightly longer.

With Labour pressing Sunak to

increase benefits in line with inflation,

he insisted that his solution was “more

generous”, because uprating would on

average have been worth only just over

£500. He said that the total extra

support of £1,200 for households on

benefits would be “roughly similar to

the average energy bill increase that

we are likely to experience over this

year”.

Paul Johnson, director of the Insti-

tute for Fiscal Studies, said that the

announcement was “a genuinely big

package of support for households. On

average the poorest households will

now be approximately compensated

for the rising cost of living this year.”

Q&A

What did Rishi Sunak announce?

From October, every household in

England, Scotland and Wales will

receive a £400 grant to reduce their

energy bills. Those on direct debits or

credit card will have £400 paid into

their accounts. People on pre-payment

meters will have the money applied to

their meter or receive a voucher.

How does this differ from the

previous plan?

In February, Sunak announced a £

discount on energy bills to be paid

back in instalments over five years.

That discount has been doubled, and

the need to repay it abandoned.

Will any people receive extra help?

Those on means-tested benefits will

get £650 paid into their bank accounts

News Politics

Tory unease at redistribution of

Chris Smyth Whitehall Editor

Geraldine Scott Political Reporter

pensioners and the disabled

given boosts

Sunak said pensioners were “dispro-

portionately impacted” by rising prices

because they were not able to work and

did not claim all the benefits they are

entitled to, so more than eight million

households that receive winter fuel

payments will be given an extra £300 in

November or December.

Disabled people on non-means-test-

ed benefits, about six million in total,

will get an extra £150 from September.

Paul Johnson said that Sunak’s pack-

age amounted to “some serious redis-

tribution from rich to poor”, but added:

“There are inevitably going to be fami-

lies on modest incomes who are just out

of reach of the means-tested benefit

system, who will feel hard done by rela-

tive to the generous treatment of those

families not so different from them who

are receiving benefits.”

triple lock and benefits

The triple lock on state pensions will

return next year while benefits will

increase in line with inflation, meaning

the elderly and poorest are in line for

rises of about 9 per cent.

The guarantee — which ensures the

state pension increases each year in line

with whichever is highest of inflation as

measured by the consumer prices index

(CPI), average earnings or 2.5 per cent

— was suspended for the 2022-

financial year to stop a disproportion-

ate rise following the pandemic.

benefits will also be uprated

using cpi inflation measure

With inflation expected to reach 10 per

cent in the autumn, when benefits are

assessed, Sunak said “that will mean a

very significant increase in benefits, in

excess of the rate of inflation”.

tory criticism

The scale of the spending prompted

concern among Tory backbenchers.

Richard Drax, MP for South Dorset,

told the chancellor he was throwing

“red meat to socialists” with his windfall

tax plan. He said the measures were

“not the Conservative way of encourag-

ing those who create our prosperity and

jobs to do just that”.

David Davis, the former Brexit secre-

tary, said there was a risk “the exche-

quer will lose more in growth than it

will gain in a windfall tax”.

Robert Jenrick, the former minister,

said: “We need to think about the tax

burden in the years ahead.” But Sunak

insisted a “pragmatic and compassion-

ate Conservative government” needed

to look after the vulnerable.

£400 £

£1,

£

for every

household with

an electricity

meter

An additional An additional

for eight million

households on

means-tested

benefits, in direct

payments

for pensioners

who qualify for

the winter fuel

payment

£

An additional

for those on

disability

benefits

is the most you could receive if you’re

a disabled pensioner on benefits

(28,100,000) (8,927,000) (8,200,000) (6,000,000 people)

£22bn

£21bn

Targeted package

announced today

Total support for

households this year

Already announced

The £21bn £11bn £

to every

household

£5.4bn

£650 for

households

on benefits

£2.5bn

£300 for

pensioners

£0.9bn

£150 for

those on

disability

benefits

Who gets what?

Brackets = Number of households

Impact of the measures announced

£1,

£1,

£1,

£

£

£

£

£

1 2 3 4 5 6 7 8 9 10 decile

£14.5k £19.7k £23.7k £28.1k £32.9k £39k £45.9k £55.1k £68.9k £104.1k

Median gross income

Source: HM Treasury

£200 to all households

with an electricity meter

£150 council tax rebate

for England bands A-D

£150 one-off payment for

disability benefits recipients

£200 additional to all

households with an

electricity meter

£300 one-off top-up for

winter fuel payment

£650 one-off payment

for households on

means- tested benefits

Payment

Based on February and May 2022 announcements

I

n 1974 Denis Healey presented

his budget in March and then

two mini-budgets in July and

November. It is only May and

Rishi Sunak has already

managed three mini-budgets this

year, with the main event still to

come in the autumn. And none of

them has been terribly mini.

Additional spending of £9 billion

announced by the chancellor in

February, a £7 billion tax cut in

March and now an additional

£15 billion of support for households

announced yesterday. This is big

money.

The latest package is quite

different. The previous two were

aimed at those on modest incomes;

Giveaway is on target — but this can’t go on for ever

this one is closely targeted on the

poor, with big top-ups for almost

everyone on means-tested benefits.

Another £200 a year for all

households through an energy bill

rebate, more for those on disability

benefits, and extra winter fuel

payments for pensioners will reduce

the pain of higher prices for many of

the less poor, but won’t draw the

sting entirely.

Put together, everything the

chancellor has announced since the

autumn has been strikingly

redistributive. The poorest have got

the most.

Remarkably, many low earners on

the national living wage who receive

universal credit should end up being

better off this year than last. High

earners are still going to be hit by

rising taxes. Gordon Brown, once

known as the “iron chancellor”,

might have been proud.

Of course, it’s not all simple.

Pouring additional money into an

economy suffering from

exceptionally high inflation — to

which the Bank of England is

responding with interest rate rises

— certainly comes with some risk.

Inevitably, there is a degree of

rough justice: the first tranche of

payments is available to those

receiving benefits as of yesterday,

but not those starting tomorrow.

Those on modest incomes just

above the reach of the means-tested

benefits system may feel quite hard

done by, especially if they could have

been claiming a small amount but

decided it wasn’t worth the trouble.

And those receiving small amounts

in benefits at the moment will get a

much bigger proportional increase

in their payments than those

receiving a higher level of help. But

these are quibbles. This is about as

substantial and well targeted a

package as was available.

The amounts involved in Sunak’s

largesse are perhaps not big enough

to make a decisive difference in

themselves. But if they presage

further spending as the government

comes under pressure on public

sector pay this year, and to provide

more support for households next

year, then we might start to worry.

I have to sound a note of caution,

one very similar to that which

Sunak has repeated on numerous

occasions. This can’t go on for ever.

In the end the only things that will

protect our living standards are

getting inflation under control and

the economy growing. Fail on that,

and all of these measures will turn

out to have been mere sticking

plasters on a gaping wound.

Paul Johnson is director of the

Institute for Fiscal Studies

Paul Johnson

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