Bevan Foundation reaction to the Chancellor’s Statement

The Bevan Foundation responds to the Chancellor’s announcement on the cost of living

Thursday May 26 saw the Chancellor announce a much-anticipated package of measures to support households across the UK with rising living costs. Among the measures announced were:

• A one off £650 payment to people who are on means tested benefits
• A £300 payment to pensioners
• An additional £150 for people on disability benefit
• A universal grant of £400 to reduce energy costs
• An extra £25m for the Welsh Government to support families
• A commitment to increase benefits in line with inflation in spring 2023.

A positive announcement

There is much to welcome about this package of support.

To date the UK Government has primarily sought to address rising costs by providing universal or near universal support. There is a wealth of evidence that high inflation has a greater effect on low-income households. The decision to target people on the lowest incomes is therefore a very positive step.

The Chancellor’s commitment to increase benefits in line with inflation in spring 2023 is also welcome. With forecasts suggesting that inflation could be in double digits by September 2022 (the data that is used to uprate benefits) there had been some speculation that the Chancellor may choose not to increase benefits in line with inflation. Indeed, the Chancellor has continued to resist pressure to increase benefits in line with the recent spike in inflation for this financial year, opting to provide a one-off cash payment instead. Today’s commitment doesn’t give immediate help but provides a degree of certainty for low-income households.   

The decision to give a grant of £400 towards energy bills instead of a £200 loan will also come as a relief although it still falls short covering the energy price hike in full. Sadly many households will still face impossible choices between eating and heating despite this help.

Finally the additional £25m that will be received by the Welsh Government provides scope for the Welsh Government do more. Providing extra help with rents, emergency cash for households in crisis and additional help with fuel costs are all options it should explore.

Room for improvement

There is still significant scope for improvement.

Chief amongst these is the UK Government’s reluctance to address long running issues with the benefits system. For example, unless action is taken to increase or remove the benefit cap, thousands of households won’t gain form benefits increasing in line with inflation next spring. The UK Government’s reluctance to address widely acknowledged issues with the Local Housing Allowance will also see more and more renters feel the pinch as rents continue to rise.

It is also important to remember that it is not just energy costs that are on the rise. Rising food and housing costs are also putting the squeeze on families. There is therefore scope for the Government to go further in considering what action it can take to address these pressures. 

The delay in providing this additional support is also likely to undermine its effectiveness. Many households have already been pushed into debt as a result of rising costs. There is a risk that many households will see most if not all of the extra funds they receive as a result of today’s announcement disappear immediately as they pay off arrears, loans and overdrafts.

Finally, whilst projections suggest that inflation will slow from 2023, costs are not set to return to 2020 levels. Whilst one off payments are therefore set to provide welcome support to households this winter, there is a need to consider what longer term measures can be taken to support households in the medium and long term. It is imperative that the Chancellor sets out how he intends to do so when he returns to the House of Commons to deliver his budget this autumn.