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The Chancellor’s financial measures bring some relief but tough times continue for many

The Chancellor’s financial measures bring some relief but tough times continue for many

(Alamy)

3 min read

Last June, I suggested to the then-chancellor – now our prime minister – some quick fixes to help people and businesses suffering from the cost of living crisis.

Three chancellors and two prime ministers later, I now take stock of what has happened since, and what we will get for the £25bn tax rises announced in the Autumn Statement.

The number of people reliant on food banks has continued to rise. Between 1 April 2022 and 30 September 2022, food banks in the Trussell Trust’s United Kingdom-wide network distributed 1.3m food parcels to people facing hardship – an increase of 52 per cent compared to the same period in 2019.

Let’s hope the task force saves more hot air than it makes

The inflation rate has continued its upward trajectory, and the country has already hit – a 40-year high at – 11.1 per cent in October this year. Prices for food and non-alcoholic beverages in the UK jumped 16.2 per cent year-on-year in October of 2022, the highest rate since at least 1989.

Businesses continue to suffer. The number of company insolvencies in the third quarter of 2022 was 40 per cent higher than in the same period in 2021

In June I asked the chancellor to ensure the benefits system provides for those in need. The new Chancellor has increased benefits by 10.1 per cent, which is welcome but is lower than the current 11.1 per cent Consumer Prices Index inflation rate and well below the real inflation rate many in poorer households experience, and follows years of cuts to the real value of benefits affecting the lives of nine million households. Families will have to wait for a further five months before they get this desperately needed cash.

The energy price guarantee announced by the Chancellor’s predecessor in September was welcome. However, the current Chancellor has announced an increase in the cost households will pay for energy from next April, when his cap for the “typical annual household energy bill” will rise to £3,000. Of course, many households are not “typical”, and many with higher energy use because of health conditions or poorly insulated and heated homes will end up paying much more. Yet the government’s take of VAT on these bills will increase.

Often it is the most vulnerable who live in the least energy-efficient homes and suffer cold, damp, and poor-quality housing. A plan to retrofit these homes could have helped millions of people. The Chancellor has instead decided to set up a task force aimed at reducing the UK’s final energy consumption from buildings and industry by 15 per cent by 2030 against 2021 levels. This is welcome but does not sort out the real suffering people are experiencing right now. And let’s hope the task force saves more hot air than it makes.

The 19 per cent small profit rate for corporation tax is helpful but is the status quo and not additional help to small businesses. Likewise, the freeze on the business rates multiplier, along with the transitional relief scheme, is welcome but does not provide extra cash to hard-strapped businesses.

A bold and welcome step would have been to abolish business rates altogether and replace them with something more attuned to the realities of today’s business models and landscape – particularly as the government continues to also dither on the online sales tax. The Chancellor’s decision to keep the VAT registration level at £85,000 for another two years (at least) will bring additional costs and regulatory burdens to many small businesses struggling to survive.

 

Lord Allen, Labour peer.

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