Share the burden as households struggle
THE soaring cost of living is beginning to bite. The forecasts are that it will become more painful still. Reports of families turning off the heating, not using fuel to cook and going hungry – while shocking, they are hardly surprising or unusual these days. This is the world we live in amid the aftershocks of Covid, Brexit and now the completely pointless and avoidable invasion by Russia of Ukraine that has added to global economic woes.
The economy and yawning gaps in income feel positively Victorian in the 21st century. Solutions are urgently needed at home and abroad. It feels as if nowhere is immune from the gathering storm, except perhaps the growing band of the super-rich and the bloated energy firms.
Platitudes are dropped from the table like so many crumbs. Prime Minister Boris Johnson said he cannot “magic away” all the soaring food and energy expenses as he comes under increasing pressure to alleviate the cost-of-living crisis. That is no answer to the pain being felt in homes across the country. There is action his government can and should take. A windfall tax on energy companies won’t ease all the burden, but would help, for instance.
“Brexit opportunities” minister Jacob Rees-Mogg has argued it is wrong to raid the “honeypot of business”. Neither Mr Johnson nor the Chancellor, Rishi Sunak, have ruled out the move, but neither have they acted.
Labour and other supporters of a windfall tax on energy firms say it could fund a VAT cut on energy bills and an increase in the warm home discount for those on a low income.
Offshore Energies UK, the energy industry’s trade body, has said the tax would put investment and jobs at risk. It said the Treasury will get £8bn from the sector and another £5bn next year, which is on top of £370bn which has been paid over the past decade. The fact is these vastly wealthy companies have the money to meet a windfall tax and invest.
The Economics Observatory, a collective initiative by UK research economists to answer questions about Covid-19 and the recovery, concedes a windfall tax may not be sufficient to compensate households for increased energy costs but says “it might make a substantial contribution towards doing so”.
At times of crisis the burden must be fair, be shared and be seen to be so. Struggling workers and households have seen their wages decrease in real terms while prices rise. Time and again in the last few years it has been lower-paid and middle-income households that have taken the hits for mounting economic gloom. This narrative sits uneasily against the backdrop of business fat cats and oil and gas firms creaking with cash.The time has come to share the burden.