After months of delay, the government is finally taking the cost of living crisis seriously

The chancellor’s support package will provide real help to the families who need it most

May 26, 2022
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Photo: Ian Davidson / Alamy Stock Photo

Sometimes the politics just don’t matter. There are understandable mutterings that the government waited too long, and that today’s cost of living announcements are a distraction from the maelstrom of anger swirling around Partygate and the details contained in Sue Gray’s report yesterday. But, today, what’s important is that real people will be getting real help during some of the hardest times many will have known. 

In recent months, the government has repeatedly failed to step up and take action to protect those on the lowest incomes who are in truly dire straits. Last autumn’s Budget, the package announced in February this year, March’s Spring Statement—all were deeply disappointing. The government has repeatedly said it “stands ready” to help those in need but has actually stood by whilst more and more have been dragged into debt and food insecurity.  

That changed today. The chancellor stood up to give his (this is definitely not an) Emergency Budget. He announced a (definitely not a U-turn) windfall tax on energy companies, going further than Labour had been demanding with a tax expected to raise £5 billion rather than the £2 billion that was the upper end of most previous estimates. He announced a package of support measures that were bigger, more targeted and better designed than any of us had expected. He avoided a wide range of options which had been considered and would have been badly targeted, inefficient or unnecessarily complex—more council tax rebates, cuts to income tax or VAT, an unreformed Warm Homes Discount boost. Instead, he finally did what practically all the experts and charities had been calling for—used the benefit system to direct help to those in most need.

The scale of the support is about right. A £650 payment to all eight million families on means tested benefits, plus an additional £300 to pensioners and £150 for disabled people. Together, these will cost £9 billion. More controversially, he also increased support for the rest of the population—doubling the energy bill discount announced in February to £400 and converting it to a grant rather than a loan, paid for by the government not through bills. That will cost £6 billion. All this means that most of those on the lowest incomes will get around £1,200, with almost everyone else getting £550 (including the earlier council tax rebate).

The package is also well-designed, addressing many of the concerns raised in advance. We worried it would focus only on Universal Credit, missing out those on older “legacy” benefits (as happened during the pandemic)—but all means-tested benefits are included. We worried the benefit cap wouldn’t be raised, meaning thousands of the poorest would miss out on the help (as was the case with raised benefits during Covid) but the additional support won’t be counted towards the cap. We worried that some pensioners would miss out, given the low take-up of means-tested pension credit, and that disabled people with high costs would be forgotten. But the extra payments address that. And we worried that there would be no help until later in the year, but £300 will be paid in July, with the rest in the autumn.

This is extremely welcome. The soaring cost of living is impacting far more heavily on those on low incomes than the rest of the country. The Institute for Fiscal Studies found that inflation for those on low incomes was 3 percentage points higher than that being experienced by richer families. Analysis by the Joseph Rowntree Foundation showed that those on low incomes would have to spend a fifth of their income on fuel bills once the price cap rises again in autumn, while middle-income families would have to spend less than a tenth of their income on energy as bills rise. 

Baby banks, foodbanks and debt advisers have been reporting record demand, with some fearing they would soon be unable to cope. Charities which support people with mental health difficulties and families under strain have been bracing for a second wave of demand as the hardship cut deeper and deeper. Easing that pressure will be beneficial both for individuals and for those charities. 

The links between financial hardship, mental health difficulties and children’s development are well-documented. A public health study found that the increase in food insecurity during the Covid pandemic was associated with a 257 per cent higher risk of anxiety and a 253 per cent higher risk of depression. The most recent statistics had shown the number of people in “food insecurity” jumped by 57 per cent since January this year, with millions unable to eat properly. Rising debt damages people’s mental health. Research by the Money and Mental Health Policy Institute shows nearly half of people in problem debt have a mental health problem, and four in 10 of those with a mental health problem said their financial situation made their condition worse. 

The consequences of all this can be long-lasting. Recent research by Pro Bono Economics and the charity Our Time highlighted the impact on children whose parents experience mental health difficulties, especially if they don’t get the support they need. The research found lifelong impacts on health, employment and wages, adding up to a long-term cost of £1.9 billion from failing to provide specialist support for the 160,000 children leaving primary school this year with a mother who has experienced an episode of depression. The research also showed that parental mental health problems have a greater impact on children growing up in poverty.

Today’s announcements will not undo the damage that months of mounting hardship has done. But they will give a much-needed breathing space, allowing charities to focus on supporting people who are already in difficulties and on tackling longer term issues, rather than drowning in an ever-growing tsunami of need. 

There are, of course, bigger-picture issues we need to get to grips with. Bolstering the adequacy of our social security system so that it prevents so many people living constantly on the brink of a crisis. Fast-forwarding action to get our homes insulated and reduce our dependence on volatile gas markets. Creating more security in our housing and labour markets so that fewer people rely on social security to cope with poor quality work and expensive homes.  

All this is left to do, but for today we can fairly (and legally) celebrate a genuine success. Much credit goes to all those who have been indefatigably campaigning for these measures. Charities and community groups have laid bare the seriousness of what they have been seeing. People living in poverty have spoken out, sharing painful experiences, offering their expertise and braving the social media backlash they often face for doing so. Labour and the other opposition parties have kept up the pressure. And many Conservative MPs and right-of-centre voices have joined the call for action, demonstrating that in these divisive times we can still come together around a common purpose and live our common values.