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Countering the cost-of-living crisis – some quick fixes

Countering the cost-of-living crisis – some quick fixes
4 min read

The government needs to move fast to advert a catastrophic decline in the life chances and life expectancy of the poorest in our society. A decline that will take years to reverse and a decline that will see deep division and derision between the well-off and the poor.

The latest figures from most authoritative sources on the health of our economy, including from the latest ONS data show a country on a downward trajectory. Use of food banks is up, with many of those who used to donate to the foodbanks now being forced to rely on them to feed their own families.

The government gave a pledge to the people – to level up – to give them chance of greater prosperity.

There are four key things the government could do now.

Ensure the benefits system provides for those in need. Whilst we have record employment, wages are not keeping pace with the cost of living and many working families are being supported by in-work benefits. Yet increases in these benefits has failed to keep up with the soaring costs these families are experiencing; in the shops, at the petrol pumps, in heating their homes, and feeding their children. And out-of-work families have experienced the biggest cuts to their benefits in 50 years.

Whilst the government has made promises to uplift benefits next year based on inflation rate this year – that does not offer the solution to problems families in desperate need now. I am concerned that families will go without food and heating or turn to loan sharks, because they are unable to access mainstream lenders, and get caught up in yet more financial hardship.

Reduce VAT on energy. It is ironic that whilst families are suffering from the rise in energy prices, the Chancellor is receiving higher VAT receipts from the higher prices. Reducing VAT on energy would give some additional help to families most in need, particularly as they spend a high and increasing proportion of their income on heating their homes.

Retrofit homes. Those families are also more likely to have the least energy efficient homes and this government must take action to redress this with a nationwide rollout of retrofitting homes, giving local authorities necessary powers and money to do so at pace. Not only would this help make homes warmer, and bills lower for poorer families it would also contribute to reducing C02 and be an opportunity to create jobs and apprenticeships across the country, at a time when there has been a significant drop in the percentage of apprentices under the age of 19 and of entry level apprenticeships.

Help small businesses. SMEs account for three-fifths of the employment and around half of turnover in the United Kingdom's private sector. They are also sources of innovation, productivity, and growth for the economy – including through knowledge intensive sectors that are fast moving, such as the digital industries.  Exactly the areas that the Institute of Directors survey showed as key to helping productivity and competitiveness of industry.

Yet these small businesses are facing very tough times. They are seeing energy prices rise, and do not benefit from a price cap. Other costs are going up too – the latest figures by the ONS show producer input prices rising by 22.1 per cent – the highest since records began. But far from assisting the lifeblood of our economy, the Chancellor appears to want to bleed them dry. He is intent on putting up corporation tax from 19 per cent to 25 per cent. He should scrap the increase and re-introduce a lower rate for small businesses.

Far from helping small businesses, the government is increasing burdens on them. The additional employer’s national insurance contribution – they should scrap the hike; the failure to support small business facing additional costs of statutory sick pay payments – they should reintroduce the rebate for small business; and a failure to tackle the burden and unfairness of business rates – they should scrap business rates and replace them with a fairer system.

The government gave a pledge to the people – to level up – to give them chance of greater prosperity. The government must act now to stop people sinking into poverty.

Lord Allen is a Labour peer and chair of Balfour Beaty Plc, THG Plc and Global Media & Entertainment, and chair of the Invictus Games Foundation

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