Energy discounts needed for people who need it most
I know readers will have become very anxious about the cost of living, rightly so.
Household bills are only going in one direction just now, particularly when it comes to groceries, heating, electricity and petrol.
That anxiety will have heightened with the news about the increase in the energy cap, about world markets and the increasing political tensions between Russia and Ukraine.
All of these have serious implications for costs and supply chains.
I also acknowledge the concerns about the direction of UK government policy in terms of National Insurance rises.
It is never popular to raise tax and I am not going to argue that the National Insurance increase will not be painful.
When the decision was made however, some time ago, there was reluctant acceptance that this rise was necessary.
The public understands that we cannot ignore the fact that the pandemic has cost £400 billion extra expenditure or the fact that six million people are currently on NHS waiting lists to receive treatment.
When it comes to price increases, producers and suppliers involved in international trade are telling us that much of the current level of inflation is a direct result of rising shipping costs and wholesale gas costs and listening to those involved in UK business, also a result of shortages in labour markets.
Other countries have the same inflation issues – Germany has now gone up to 4.9 per cent, France to 3.3 per cent and the United States to 7 per cent.
So how do we tackle this situation? I hear the claims that VAT on fuel bills should be scrapped but this is not the best way of assisting those most in need since it is not a progressive measure
Indeed, it would reduce bills by just five per cent and cost the Treasury billions.
I have also heard the claims for windfall taxes on oil and gas profits, similar to the Gordon Brown windfall tax on privatised utility companies in 1997, but if we look abroad to countries like Spain, these schemes have had very limited success.
The utility companies in question are owned by us all through pension funds and insurance firms and it is essential they remain attractive to new investment but this will not happen if the companies become subject to unstable tax policy.
That risks a reduction in output and therefore increasing prices for consumers.
We should not forget that £100 billion of investment is needed to secure future power generation.
In short, the energy experts are telling us that we need to increase energy supply and reduce the demand and a windfall tax would do the exact opposite.
Instead, the UK government has introduced loans to the energy companies of £5-6 billion, which will mitigate household bills by around £200 for the worst of the inflationary period.
The loans will be very helpful but will need to be paid back over time so l hope the UK government will also pursue plans to increase the warm home discount for families most in need so they can get immediate and more substantial assistance.
That is certainly what consumer groups are demanding.
This year is going to be tough on household budgets.
The glimmer of hope is that the economists think it will be more short-lived than the rampant inflation of the 1970s that some readers will remember.
Let’s hope they are right.