Politics

Easing the cost-of-living crisis

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Easing the cost-of-living crisis

Massive fall in real disposable incomes, started back in 2021 forecasts won’t end until 2024. Rapid rise in inflation off the back of Brexit, covid pandemic helping to increase it. Russia war with Ukraine has helped cause a huge energy supply shock. Shocks like that are normally deflationary, market failure has helped make this shock worse. Last decade has seen weak wage growth, barely at same levels last seen in 2008. Poorest have suffered the most over the last decade, won’t be changed any time soon. Reforms designed to help kick start wage growth have stalled or failed to appear. Growth has been slower compared to before Brexit, economy is smaller compared to what it would be. Weak fiscal stabilizers forced monetary policy to act and cause a recession. 

  1. Increase the base level of all benefits
  2. Increase benefits in line with inflation and above it
  3. Scrapping 2 child limit on tax credits
  4. Scrapping the bedroom tax
  5. Change the UC taper rate
  6. Scrapping age rules on housing benefits / increase to match rents
  7. Allow local councils to pay housing benefits directly to landlords
  8. No delay on first UC payments
  9. Cash payments for energy bills
  10. Writing off any legacy debts
  11. Targeted support for food bank users
  12. Expansion of social tariffs

Well known that best way to solve poverty is more money.  Longer term solutions are required like insulation program funded by grants. UK housing stock leaky, having some of lowest energy efficiency in Europe. Reforming the rules making housing stock healthier, would help with people’s health overall. 12 points listed above is undoing some of the government flagships reforms to welfare. Longer term reforms to energy market to include more resilience against price shocks.

Giant fall in disposable incomes something not seen for decades. Normally only see disposable fall that much during a recession, very real worry about stagflation. Boris and Rishi have decided for one off cash payment. Won’t be enough to cover the fall in disposable incomes but better than nothing. Half measure that already too late.