Brits ‘should receive £500 cash payment’ to help pay household bills, economist urges

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An expert has asked the Chancellor to give nearly all Britons £500 to help with the escalating cost of living crisis. (Getty Images)

Boris Johnson is facing calls to urgently increase financial support for Britons amid an escalating cost of living crisis caused by soaring energy bills, rising inflation, hikes in taxes and the war in Ukraine.

On Wednesday, the Prime Minister defended the aid already on offer as Labor leader Keir Starmer called for a windfall tax on the profits of oil and gas companies to generate additional funds to help families.

The government’s current support package will see Britain’s 28 million households receive an initial £200 refund on their energy bills from October. This will be recouped by raising bills by £40 a year over five years from 2023. He also promised a £150 council tax refund for homes in bands A to D.

And while Johnson has ruled out the prospect of a windfall tax, some economic experts have said the government must act quickly to protect those most at risk of being pushed into fuel poverty.

At a Select Committee on Work and Pensions in Parliament on Wednesday, Aveek Bhattacharya, chief economist at the Social Market Foundation think tank, called for a cash payment of £500 for everyone, at the exception of high-rate taxpayers.

Read more: ‘Extraordinary’ warning energy bills can exceed £3,000

The proposal would be comparable to a similar stimulus package introduced by Donald Trump at the start of the pandemic, which was sent to all Americans to help deal with the financial hit of COVID-19.

“I would be in favor of trying to have a very, very broad basic cash payment to more or less everyone – or, perhaps, excluding higher rate taxpayers – to recognize the fact that everyone is going to suffer at least a little,” says Bhattacharya.

“But with a higher payment targeted to low-income and low-income households on Universal Credit.”

There were reports that the government was considering such a program to deal with soaring energy bills in January. Instead, Rishi Sunak launched an “energy rebate scheme” after Ofgem announced that the energy price cap would rise by 54% on April 1, meaning that the average annual energy bill of the UK household will rise from £693 to £1,971.

However, the scheme has been widely criticized for being partially reimbursable and confusing.

File photo dated 03/02/22 of an owner turning down the temperature of a gas boiler, as British E.ON boss Michael Lewis (not pictured) says the government needs to focus on the UK's exit from the gas network and improving energy efficiency to reduce energy bills, following Ofgem's announcement, the price cap will increase by 54%.

Experts have warned energy bills could top £3,000 a year. (AP Pictures)

In the week after Sunak’s announcement, a Savanta ComRes poll for Yahoo News UK found that one in four Britons didn’t realize the £200 discount would have to be repaid, and another quarter didn’t even heard of politics.

Bhattacharya also criticized the chancellor’s plan.

“A simple cash payment is better than a complex, convoluted scheme – as we have seen with the Chancellor’s measures,” Bhattacharya said. “There was a lot of misunderstanding, a lot of confusion.”

Labor have called for the Government’s energy bills program to be scrapped, with Starmer calling it a ‘total waste of money’, asking: ‘When will the Prime Minister force the Chancellor to turn around?’

The impending crisis could not be more brutal.

share of income after housing costs spent on energy bills

Proportion of income after housing costs spent on energy bills. (ONS/Joseph Rowntree Foundation)

On Tuesday, the Resolution Foundation warned that UK households could face the biggest drop in real incomes since the 1970s, which could fall by 4% for people of working age in the financial year 2022 to 2023.

The drop in real incomes would represent a drop of £1,000 per household for non-retirees – a drop that would normally be associated with recessions, the researchers say.

Inflation is expected to hit around 8% this spring with the foundation’s chief executive, Torsten Bell, warning that living standards could get worse than during the economic shutdown triggered when the UK was plunged into a COVID lockdown in March 2020.

“Even when you get to the mid-2020s, we still won’t be as well off as you were during the pandemic,” he said. “That’s the magnitude of what’s happening – we’re going to go back to where we were when that was when the actual lockdowns were happening.”

A government spokesperson said: “We are providing over £20bn to support people facing the cost of living pressures they face and we will continue to do all we can to protect consumers and the public. .

“This includes the £9.1 billion energy rebate scheme which will provide a rebate of £200 from October for all households in Britain and a rebate of £150 for the majority of households in England at from April.

“The energy price cap will also continue to ensure that more than 15 million households pay a fair price for their electricity and gas in the months ahead.”

Watch: The cost of living crisis will be ‘deadly’ for some poor children – Jack Monroe

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