Cost of living support welcomed but ‘reassurance needed on long term pressures’
Finance secretary Kate Forbes has welcomed the short term action announced by the Chancellor of the Exchequer to mitigate the current cost of living crisis that in part is being driven by the unprecedented rise in energy prices but warned more support is needed for households and businesses as the crisis worsens.
Yesterday the UK Government took steps to ensure that cash grants, rather than loans, are provided to those on lowest incomes.
A new £15 billion package of targeted government support includes a new, one-off £650 payment to more than eight million low-income households on Universal Credit, Tax Credits, Pension Credit and legacy benefits, with separate one-off payments of £300 to pensioner households and £150 to individuals receiving disability benefits – groups who are most vulnerable to rising prices.
Rishi Sunak also announced that the energy bills discount due to come in from October is being doubled from £200 to £400, while the requirement to pay it back will be scrapped. This means households will receive a £400 discount on their energy bills from October.
The new Cost of Living Support package will mean that almost all of the eight million most vulnerable households will receive at least £1,200 of extra support this year, including the £150 council tax rebate that many families received last month – equal to the average energy price cap rise over this year.
To help pay for the extra support, the Chancellor said a new temporary 25% Energy Profits Levy would be introduced for oil and gas companies, reflecting their extraordinary profits. At the same time, in order to increase the incentive to invest the new levy will include a generous new 80% investment allowance.
Rishi Sunak said: “We know that people are facing challenges with the cost of living and that is why today I’m stepping in with further support to help with rising energy bills.
“We have a collective responsibility to help those who are paying the highest price for the high inflation we face. That is why I’m targeting this significant support to millions of the most vulnerable people in our society. I said we would stand by people and that is what this support does today.
“It is also right that those companies making extraordinary profits on the back of record global oil and gas prices contribute towards this. That is why I’m introducing a temporary Energy Profits Levy to help pay for this unprecedented support in a way that promotes investment.
“There is now more certainty that households will need further support, with inflation having risen faster than forecast and Ofgem expecting a further rise in the energy price cap in October.”
Ms Forbes cautiously welcomed the Windfall Tax on energy companies benefiting from significant profits but commented that it means Scottish industry is disproportionately funding interventions across the UK.
Responding to the Chancellor’s statement, Ms Forbes has said UK Ministers should have acted earlier and gone further to provide more support that would make a real long term impact, including following the Scottish Government’s lead by doubling the Scottish Child Payment to £20 per week – which is due to increase to £25 from late 2022 helping lift an estimated 20,000 children out of poverty in 2023.
Ms Forbes said: “Many households will be relieved to see the support belatedly announced today, but we still need a long term solution to the cost of living crisis and reassurance that the UK Government is going to tackle long term inequalities rather than provide one-off bursts of crisis support.
“Rather than listen to our plea for a comprehensive funding package that fully addresses the unprecedented rise in the cost of living and uses the full £30 billion of fiscal headroom, this piecemeal approach makes it highly likely that more support will be needed later when energy prices rise significantly in the autumn.
“There is also a severe lack of support for businesses – many of them are still struggling to recover from the pandemic and now face crippling increases in energy costs and the damaging impacts of Brexit on supply chains and the labour market. Without urgent economic support there is a real risk that the UK economy is heading for a recession.
“Inflation is at its highest levels in 40 years and the UK Government’s failure to fully invest in increasing incomes, tackling inequality and boosting economic competitiveness will only risk pushing households into further debt and poverty
“The UK Government has almost £30 billion of fiscal headroom, spending only half of this during a cost of living crisis does not go far enough, especially when a further £5 billion from the Windfall Tax will be raised.
“The introduction of a windfall tax is a start, but as a stand-alone measure this means Scottish industry is carrying the weight of UK-wide interventions.
“The removal of the £20 Universal Credit uplift last year was a hammer blow to hard pressed families and the Chancellor’s failure to restore it and increase it to £25 only places a disproportionate burden on the shoulders of those who need help most. The statement was also worryingly silent on public-sector pay with no related consequential funding, when the lowest paid need urgent assurance in the face of rising inflation.
“The refusal to reverse the National Insurance increase implemented in April and temporarily suspend VAT on household energy bills will also cost families hundreds of pounds annually at a time when their budgets have never been more squeezed.
“The Scottish Government has already taken action to support people, communities and businesses as much as possible, with almost £770 million per year invested in cost of living support. We have increased eight Scottish benefits by 6%, closer to the rate of inflation, and introduced a range of family benefits not available elsewhere in the UK.”
Energy expert Mike Foster, CEO of not for profit trade association the Energy and Utilities Alliance, has said it is time for the government to make some long-term policy decisions to further protect consumers from rising energy costs and give the UK energy independence.
Mr Foster said: “We welcome the announcement from the Chancellor on the grants for households that finally provide a lifeline to those struggling with the elevated cost of energy bills. This type of short term measure is a vital step in protecting the most vulnerable in our society from falling into fuel poverty as the energy market remains turbulent in the approach to another price cap rise in October.
“Now, the government needs to look at the long-term protection of the British people and their financial situation in the face of rising energy costs by urgently shifting away from fossil fuel gas to hydrogen, using the world-class gas networks already underground to supply our homes and businesses. This will create more secure energy supply to homes breaking free from the blood-stained hands of President Putin, and positioning the UK as the world’s leading hydrogen economy.
“Now is not the time to consider re-wiring Britain; ripping out boilers to be replaced with £10 grand a time heat pumps would be a folly when clean gas is just around the corner. Hydrogen heating will mean people can keep their gas boilers, cookers and fires; it is just the gas that is being changed. We did the same thing in the 1960s, moving from Town Gas to natural gas, now we will move from natural gas to hydrogen. The UK will lead the way, as it did before, giving the nation energy independence and protecting our people in the process.
“Consumers will avoid major disruption to their lives, minimise the costs associated with achieving net zero, at the same time help save the planet from climate change, and keep Putin’s gas in the ground. Avoiding a cost burden on the British public and removing reliance on foreign fossil fuel supplies seems like a no brainer to the heating industry, so we call on the government to think ahead and start the wheels in motion for developing the hydrogen economy now.”
Citizens Advice Scotland chief executive Derek Mitchell said: “People have been desperate for support and today’s announcement is very welcome, however those on low incomes are still going to feel a significant squeeze on their household budgets and no one should be in any doubt about what that means - people choosing between feeding their children or keeping them warm.
“One in five people in Scotland are already running out of money regularly before pay day. Demand for online advice around food banks and crisis support is now almost double what they were last year. Today’s cost of living crisis risks a tsunami of poverty, debt and destitution in the months and years ahead.”
STUC General Secretary Roz Foyer said Sunak’s announcement isn’t even close to addressing the rising cost-of-living crisis and doesn’t go far enough to help those facing worsening wages and rising bills.
Ms Foyer said: “While the measures announced today are a tiny step in the right direction, they don’t go far enough to address the worsening wages and cost of living crisis. We have had a decade of stagnating pay, attacks on the social security net we all rely on, and cuts to public services that left people across Scotland living in poverty. The extra funding is paltry in comparison to the steeper bills and low wages facing us.
“Confronted with the biggest fall in living standards since the 1950s, community organisations and trade unions in Scotland are coming together on 17 June 2022 for a rising cost of living summit to demand real action to build a society where everyone has the access to the income and services we all need to live a dignified life.
“We will also be joining trade unionists and other anti-poverty campaigners from across our isles at the “We Demand Better” demonstration in London on 18 June 2022 to send a strong message to this government that Enough is Enough.”
Philip Whyte, director of IPPR Scotland said: “While the unnecessary delay leading to today’s announcement has meant families facing unacceptable hardship, it is a welcome reprieve that is better late than never. Nonetheless, this package is just a sticking plaster when households need long-term certainty. Further support cannot be ruled out, and the Scottish Government must now urgently set out how they will use at least the additional £41 million they are expected to receive to further help the most vulnerable households.
“The current situation underscores the fact that the cost-of-living crisis is also a climate crisis, and vice versa. As we move forward, we need to go further, faster on helping households to make the necessary improvements to their heating and insulation - particularly those who are fuel poor – to address that twin crisis.
“The Scottish Government has made ambitious commitments to decarbonise domestic heating and improve energy efficiency. The priority now should be to supercharge delivery of those, at the necessary scale, to help Scotland’s poorest households improve their living standards and cut their bills, while putting Scotland on a credible path to meeting its emissions reduction targets. The UK government too must commit to moving away from a dependence on fossil fuels and provide the necessary capital investment to support those ambitions.”
Age Scotland’s Chief Executive, Brian Sloan, added: “There’s no doubt that the measures announced by the Chancellor today will make a significant difference to older people, particularly those on low and fixed incomes who need the greatest level of support.
“There is certainly more money available than we might have expected. And with tens of millions of pounds of extra money being made available to the Scottish Government, they must ensure this also gets to those most in need.
“We are experiencing exceptional circumstances in terms of the rising cost of living and, especially following this week’s ominous predictions from Ofgem, the only way to mitigate the damage to households was with urgent and preventative action like this.
“The extra support will go a long way to ease the minds of people who have been really struggling in recent months, offering much-needed reassurance that they will be in a better position to heat their homes and afford essentials in the winter without fears of falling into debt.”