Cost-of-living crisis: five suggestions for Rishi Sunak

Rishi Sunak has hinted that more support may be on its way to help Britons deal with the cost-of-living crisis.

Speaking to BBC Look East on a visit to Ipswich, the chancellor said that he had been “very clear” that the government “stood ready to do more” as millions grapple with spiralling bills. Sunak said the government would be more able to formulate a response once they had “better clarity” on what energy prices will be in the autumn.

“The forces we are grappling with are global in nature and we are not the only country to be facing higher energy prices or higher inflation in general,” he said. “You know, we can do things to support people and we are going to do what we can to ease the burden. I wish I could make it completely go away, but I can’t.”

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But while the chancellor has not yet made clear what additional measures the government might take, senior business figures and politicians have already put forward a few ideas of their own.

Reduce energy bills for millions

Scottish Power chief executive Keith Anderson has called on the government to reduce the energy bills of ten million households by £1,000 this October, reported the BBC.

Anderson has warned that the next energy bill rise in October to around £2,500 and £3,000 a year could spell disaster for supplies and customers alike, leaving energy firms facing huge losses while customers are unable to pay their bills. He said that the government’s plan to hand households a £200 tax rebate in October to go towards their energy bills would not be enough to cover rising costs.

Instead, he had suggested that a “£10bn tariff reduction fund could be paid for by adding £40 annually to all household energy bills for the next decade”, explained the broadcaster. The energy boss said that such a fund would “directly tackle” the biggest cause of the cost-of-living crisis – rising energy costs – in a way that other measures, such as cuts to fuel duty, would not.

Impose a windfall tax on energy companies

As energy giants report record profits, Labour has called for a one-off windfall tax to fund measures that would ease the cost-of-living crisis for families in the UK.

BP reported underlying profits of $6.2bn (£4.9bn) for the first three months of the year, reported the BBC, while Shell’s quarterly profits were its highest ever, with the energy company making $9.13bn (£7.3bn) between January and March.

Labour has proposed an increase of 10% on corporation tax for North Sea oil and gas producers in the year beginning April, which it says could raise up to £1.2bn to go towards helping households meet the costs of rising energy bills.

Boris Johnson criticised the plan, saying it would discourage investment in the UK. But when BP’s chief executive, Bernard Looney, was asked by The Times if a windfall tax would mean the company would cancel any investments, he said: “There are none that we wouldn’t do.”

Restore Universal Credit boost

The former Conservative leader Iain Duncan Smith has called on Johnson’s government to boost Universal Credit to help those on lower incomes to deal with the cost-of-living crisis, reported the i news site.

He also urged the government to scrap rises in National Insurance in order to help “reset” the government and “put money in people’s pockets” after the Conservative Party faced huge losses in last week’s local elections.

“We now have one of the highest rates of tax that we’ve had for a generation – that cannot happen under a Conservative watch so that tax rate has to come down,” Duncan Smith told the paper. He added that “in the short term” the government need to “look at using Universal Credit to help those on the lowest incomes afford some of these bills because a lot of lower income won’t be helped by tax cuts”.

He advised the government to either restore “the £20 (uplift) or a further cut in the taper rate, which is a tax basically, or more money in work allowances for those in the lowest incomes”.

Slash taxes

Pressure has been applied to Sunak from inside government too. Policing minister Kit Malthouse said during a cabinet meeting in April that reducing the tax burden would be the best way to help families with the cost-of-living crisis.

“We are a party and a government of low taxation,” Malthouse is reported to have told the room, according to one cabinet colleague who spoke to The Telegraph. “The quickest way of actually regenerating the economy and getting retail activity and job creation back on course is by reducing the tax burden, not increasing it,” he said.

The paper reported that his view “received support from the room” and was later backed by former cabinet ministers. But while the prime minister was said to be “sympathetic” to the proposal, Sunak argued that further changes to tax would have to wait until the autumn budget.

Emergency budget

Business leaders have argued that Sunak should not wait until the autumn to introduce new measures to help lessen the impact of rising costs, and should “draw up an emergency budget” to help support companies struggling with the rocketing costs of “energy, raw materials and labour”, reported the Financial Times (FT).

The call has come from the head of a leading business lobbying group, Shevaun Haviland, director-general of the British Chambers of Commerce. She has reportedly written to the government to “ask for a package of economic measures to ease the cost of doing business in the UK, as demand shows signs of slowing down”, said the FT.

Haviland urged Sunak not to wait until his next budget to intervene as “it is easier to keep a business open than to get them to reopen once they have closed”, she said.

The British Chambers of Commerce has proposed that the government’s National Insurance hike is pushed back to “ease cost pressures on employers”, as well as recommending that Sunak cut VAT on energy bills from 20% to 5%.