Helping the most vulnerable with the cost of living

The last few years have been unprecedented – from a pandemic that has severely damaged the global economy to a cost of living challenge now being felt across the world.

Due to a series of global forces – economies reopening following the pandemic, Russia’s invasion of Ukraine, and a fresh wave of lockdowns in China – families and businesses are being hit here at home through a significant rise in inflation and therefore everyday prices.

While it is impossible for any government to solve every problem, the priority today must be to help the millions of families struggling with the cost of living. The Government is doing this today through a £15 BILLION package which will support the most vulnerable one-third of households with £1,200 each:

• Raising extra revenues through a new Energy Profits Levy, but without deterring investment
• Providing £9 BILLION targeted support to the most vulnerable households, including pensioners
• Supporting hard-working families with £6 BILLION to help with energy bills

They are now providing a total of over £37 BILLION of support to help families with the cost of living. This forms part of their plan for a stronger economy – creating jobs, cutting taxes on working people, reducing borrowing and debt, driving businesses to invest and innovate, unleashing a skills revolution, seizing the benefits of Brexit, and levelling up growth throughout the UK.

• £650 cost of living payment for every household on means-tested benefits. This means over 8 million of the most vulnerable households (around one-third of all in the UK) will be directly sent a one-off cash payment of £650, paid out from DWP in two separate instalments, with the first due from July and the second in the Autumn. Payments from HMRC for those on Tax Credits will follow one month later. All those who live in the UK and are in receipt of Universal Credit, Jobseekers Allowance, Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit and Pension Credit are eligible.
• £300 pensioner cost of living payment for every pensioner household in receipt of Winter Fuel Payment. Around 8 million pensioner households already receive Winter Fuel Payments, which they have increased to £300. The government will send all existing recipients an additional one-off £300 cash payment, due to be paid out automatically in November/December.
• £150 disability cost of living payment for those in receipt of disability benefits. For the nearly 6 million people who receive disability benefits – including Personal Independence Payments, Disability Living Allowance, and Attendance Allowance – there will be an additional one-off cash payment worth £150, paid out from DWP in September. This will help to pay for the higher costs often faced by those who require special equipment in their households.
• £500 million to help hard cases. They are providing an additional £500 million for the existing Household Fund from October, to ensure local councils can support those not covered by the above set of payments. Local councils will continue to have discretion over exactly how the funding is used.
• Doubling the October £200 rebate to £400 – and turning it into a cash grant. As well as supporting those on the lowest incomes, it is also fair that they help ordinary working families. That is why the initial £200 rebate for every household the government announced in February will be doubled to £400 – and we will cancel the existing clawback mechanism, thereby turning it into a £400 cash grant for every household. This will continue to be delivered by energy suppliers from October, with payments spread over six months

This package will benefit the lowest-income households by £1,200 – with some households receiving £1,650

• This package equates to £1,200 for those on the lowest incomes – around one-third of all households. The lowest-income households on means-tested benefits will receive £650 from today’s one-off payment, £400 from the energy bills cash grant, and £150 from the council tax rebate – totalling £1,200. For the 8 million most vulnerable households in the country, this £1,200 is comparable to the average energy bill increase over the course of this year.
• Pensioners will receive £850. A pensioner household will receive £300 through the additional Winter Fuel Payment, £400 from the energy bills cash grant and £150 from the council tax rebate – totalling £850.
• Hard-working families will receive £550. Most households will receive £150 from the council tax rebate, along with £400 from the energy bills cash grant – totalling £550.
• Some individuals could receive up to £1,650. A low-income household on pension credit with a disability would receive the £650 one-off payment, £300 through the Winter Fuel Payment, £150 for disability benefit recipients, £400 from the energy bills cash grant, and £150 from the council tax rebate – totalling £1,650.
• Government support to help families with the cost of living now totals over £37 billion. Today’s package of measures provides support worth over £15 billion. Combined with the over £22 billion of support the government have already announced, they are supporting families with over £37 billion – or 1.6 per cent of GDP, similar/higher than France, Germany, Italy and Japan. Over three-quarters of support will go to the most vulnerable households – including pensioners.
• Next year, the government anticipate benefits will be uprated by this September’s CPI, which is likely to be significantly higher than the forecast inflation rate for next year.

This builds on the Government's existing £22 billion package of support to help families address the cost of living:

• £9 billion to help households address rising energy costs. They government have provided a non-repayable £150 cash rebate for homes in Council Tax bands A-D, equivalent to 80 per cent of all households. They also provided £144 million of discretionary funding for local authorities to support households.
• Slashing fuel duty by 5p for twelve months. Conservative governments have frozen fuel duty for twelve consecutive years. But in recognition of the unprecedented circumstances pushing up fuel prices, the government cut fuel duty by 5 pence for a full year – only the second cut in twenty years, the LARGEST EVER cut across all fuel duty rates, and a new tax cut itself worth £2.5 billion, adding up to over £5 billion together with the cost of the freeze. This will save car drivers £100, van drivers £200, and HGV drivers £1,500 this year. Furthermore, 40 per cent of the cut will benefit businesses.
• The National Insurance personal threshold will rise from £9,500 to £12,570 from July. At the Spring Statement 2022, they raised the threshold from £9,500 to £12,570 from July – the largest increase in a starting personal tax threshold in British history, equivalent to a £6 billion tax cut for nearly 30 million workers and worth over £330 a year starting in July, across the entire United Kingdom. This is the largest single personal tax cut in a decade.
• Cutting tax for low-income families by reducing the Universal Credit taper rate. To make sure work pays, and to help the lowest-income families in the country, they cut the taper rate by 8 pence, taking it down from the current 63p to 55p. This is a tax cut for 2 million low-income families worth £2.2 billion this year, or an extra £1,000 in their pocket. Together with other tax changes, as well as the NLW increase in April, a single mother of two working full-time will be better off by around £1,600 a year – while a working couple with two children, one working full-time and one part-time, will be better off by £3,000 a year.
• Cutting the basic rate of income tax to 19 pence in 2024. It would be irresponsible to do this now, but by 2024, inflation is forecast to be back under control, debt will be falling sustainably and the economy growing. The government will therefore cut the basic rate of income tax by 1p, a tax cut worth £5 billion for over 30 million workers, pensioners and savers – only the second income tax cut in two decades and the first income tax cut for 16 years. This will be worth around £175 for a typical taxpayer.
• Scrapping VAT on energy saving materials. Our current VAT relief for families installing energy saving materials used to be more generous. But the European Court of Justice in 2019 forced us to add complex red tape which limited eligibility, removed certain items from qualifying, and restricts VAT relief to 5 per cent. The government are now using their Brexit freedoms to remove this 5 per cent VAT charge over the next five years, reverse the EU’s decision to take wind and water turbines out of scope, and remove all the EU-imposed red tape, adding up to a £250 million tax cut for energy efficiency.
• Additional support to help household energy bills. Cold weather payments provide £25 per week in cold weather, supporting 4 million vulnerable households. The Warm Homes Discount provides a £150 rebate on energy bills each for 3 million low-income households. Our Energy Company Obligation saves £300 on bills for 300,000 people in fuel poverty, worth £1 billion.
• Boosting home insulation. Investing over £3 billion to improve energy efficiency in almost 500,000 lowincome, fuel poor households, meaning average savings of nearly £300 per year with grants of £25,000.
• Significantly increasing the National Living Wage. The National Living Wage increased on 1 April 2022 by 6.6 per cent to £9.50 per hour for those over the age of 23 – an increase worth over £1,000 to over 2 million full-time workers this year; over £5,000 for a full-time worker since the introduction of the NLW by a Conservative government in 2016; and over £6,000 since 2010. The government are committed to going further, so that the National Living Wage reaches two-thirds of median earnings for those 21 and over by 2024.
• Cutting and freezing alcohol duties. They’re introducing a new Draught Relief which will apply a new, lower rate of duty on draught beer and cider – cutting duty by 5 per cent, the biggest cut to cider duty since 1923 and the biggest cut to beer duty for 50 years. This will boost British pubs by nearly £100 million a year – and means a permanent cut in the cost of a pint by 3p. And we are freezing all alcohol duties for the 3rd in a row, including for whisky – a tax cut for families worth £500 million every year.
• Permanently increasing the generosity of the Local Housing Allowance for housing benefit. They permanently upped the LHA to the 30th percentile of market rates last year and kept cash levels at these higher rates going forward. This costs nearly £1 billion a year and has meant over 1.5 million households are benefitting from an additional £600 per year compared to before the pandemic.
• They are investing over £200 million a year to continue the Holiday Activities and Food Programme to provide enriching activities and a healthy meal for disadvantaged children in the holidays.
• The best way to help with the cost of living is to help people into good jobs. Somebody moving from welfare to full-time work on the NLW is over £6,000 better off. Our Kickstart scheme fully funded over 152,000 jobs for young people at risk of long-term unemployment. Restart will help 1.4 million long-term unemployed people. The government have doubled the number of work coaches to 27,000. And they’re increasing skills spending by £3.8 billion over this Parliament (26 per cent in real terms) to help people get the jobs they want – skills bootcamps, traineeships, Sector Based Work Academies, apprenticeships, new Institutes of Technology, more post-16 Further Education funding and the PM’s Lifetime Skills Guarantee

A reminder of 16 TAX CUTS that Conservatives have introduced during and following the pandemic:

1. Increasing the National Insurance personal threshold to £12,570, a £6 billion tax cut for nearly 30 million workers and worth over £330 a year, starting in July
2. Slashing fuel duty by 5p, only the second cut in twenty years and saving car drivers £100
3. Cutting business rates by 50 per cent this year for 90 per cent of retail, hospitality and leisure businesses
4. Reducing the Universal Credit taper rate to 55p, a tax cut for 2 million low-income families worth £1,000
5. Introducing a brand new Super Deduction on capital investment for companies – a £25 billion tax cut
6. Raising the employment allowance to £5,000, a new £1,000 tax cut for half a million small businesses
7. Removing VAT on energy saving materials, a £250 million tax cut for energy efficiency
8. Cutting beer duty by 5p, and freezing all alcohol duties for the third year in a row
9. Creating a new half price rate of Air Passenger Duty for domestic flights within the United Kingdom
10. Doubling creative industries tax reliefs for our world-leading theatres, orchestras, museums and galleries
11. Creating new business rates reliefs to incentivise improvements and green investment
12. Extending the £1 million Annual Investment Allowance for a further 15 months during the pandemic
13. Reducing VAT to a temporary 5 per cent rate for retail, hospitality and leisure during the pandemic
14. Cutting stamp duty for house sales under £500,000 for a total of fifteen months during the pandemic
15. Removing VAT from e-books and e-publications
16. The government will cut income tax by 1p

Today's set of announcements are very welcome: specific, well-considered and imaginative interventions targeted to help the most in need. Over the coming year we will need yet more creativity and compassion to support those most heavily impacted by the cost of living crisis and to ensure the economy performs as best it can in tough global conditions.

This is not the end of what the government can and will be doing to help us get through this crisis, and I look forward to seeing more effective interventions over the coming year.

Photo by Nick Fewings on Unsplash