Will Rishi’s sticking plaster make up for his £53m dithering?
AFTER four glorious days of celebrations for the Queen’s Platinum Jubilee, many people will again be sadly facing the reality of the cost of living crisis.
So has Chancellor Rishi Sunak’s financial package announced on May 26 taken the fear out of the situation?
It certainly created welcome headlines for the Prime Minister to divert attention from Sue Gray’s report into covid rulebreaking at 10 Downing Street.
After months of ordering Conservative MPS to vote against Labour’s proposed windfall tax on the unexpected and unearned profits of the major oil companies, the Chancellor performed a dramatic u-turn and introduced one himself.
But Mr Sunak’s dither and delay has cost consumers £53 million for every day the Chancellor refused to act. That is because the levy only applies from May 26, meaning the Treasury will receive no extra income from recent price spikes, with BP and Shell reporting ‘super profits’ of £11.5 billion in the last quarter of 2021 and the first three months of 2022 alone.
For months, it has been clear that such an intervention was necessary because the oil companies have earned extraordinary profits from the surge in prices. The chief executive of BP, Bernard Looney even described BP as a ‘cash machine’ for investors amid the energy crisis.
According to the Office of National Statistics, nearly four out of 10 adults are now cutting back on their food shopping because of rising costs. It’s a situation that shows no sign of abating. It is to be welcomed that the Chancellor has finally targeted eight million of the poorest households, who receive meanstested benefits with two lump sum payments worth up to £650, starting from July.
The benefits system is a readymade device to help the most in need.
In his earlier spring statement, the Chancellor ignored the very different challenges faced by the poorest as compared to the well-off. But, in the context of a £1,500 increase in energy bills and rapidly rising food prices, these lump sums won’t really touch the sides. Families living on the edge barely have enough to live on in normal times.
So, while these payments may avoid catastrophe, they are not enough to help people over the next 18 months or even longer. Someone on universal credit gets £79 a week and that is just not enough to live on.
The £20 uplift in universal credit during the height of the Covid-19 pandemic, that the Chancellor so cruelly later swept away, was vital to them.
But that is just loose change to the Chancellor and his wife, who are among the country’s richest families.
The Resolution Foundation exposed the disparity between the inflation rates experienced by the richest 10th of households and the poorest 10th in the UK. It is at a 16-year high because poorer households have to spend a much higher proportion of their income on fuel and food. It is no wonder the number of people using food banks has been spiralling. This is not a temporary problem. It requires a long-term solution, not just a one-off payment, however welcome. Sunak has simply applied a sticking plaster, not a solution to the crisis. This windfall tax on oil companies will also deliver a windfall to second home owners.
About half a million homes will qualify for additional £400 payments. That’s a total of £200m going to people with multiple properties.
This energy crisis has made us focus, as never before, on our use of energy. The best way to reduce energy bills is to insulate millions of homes each year. With the climate change emergency, we must also urgently invest in renewable energy. But the Chancellor made no such commitment. Instead, his windfall tax with its tax reliefs on capital spending by oil and gas producers, encourages them to keep on drilling.