The government did not lay out any feasible plan to address the cost of living crisis in the Queen’s Speech on Tuesday – even though, according to experts, it still has the means to do so.
Prime minister Boris Johnson did suggest he would act on the crisis soon, telling the Commons he and Rishi Sunak will be “saying more about this in the days to come”.
However, levelling up secretary Michael Gove and Treasury officials have rejected the idea that this could mean an emergency budget is on its way.
According to the Office for Budget Responsibility – the official independent forecaster – there is approximately £20 billion left for the Treasury to help out with the general public’s finances without causing too much trouble further down the line.
But the Treasury has chosen not to use it. So here are nine ways the government could spend that money to alleviate the current crisis:
1. Uplifting Universal Credit by £25 a week
This would cost the government £1.35 billion to do this for six months, between May and October, according to calculations from National Institute of Economic and Social Research (NIESR).
Another think tank, the Institute for Public Policy Research (IPPR), echoed this idea and proposed an increase in universal credit and legacy benefits of 8.1%, along with increasing child benefit by £10 per week, per individual.
This would cost £1.5 billion more than Sunak’s Spring Statement but would keep the crisis impact on the poorest people below £200.
Economist at King’s College London and former Treasury official, Jeevun Sandher, also suggested that bringing back universal credit uplift would cost £6 billion – which is less than 1% of GDP.
He told The Big Issue: “There is only one reliable way to help families who can’t make ends meet. And that is with cold, hard cash.”
2. One-off cash payment of £250 for energy bills
This would go towards the 11.3 million households in the bottom half of the income distribution, and would cost £2.85 billion, according to the NIESR.
When Ofgem – the energy regulator – lifted the price cap at the beginning of April on energy bills, the cost of living crisis really kicked in.
The annual energy bill for the average household rose by £700 (54%) for England, Wales and Scotland.
It means consumers will end up paying closer to £1,971 on average for their yearly gas and electricity bills, potentially pushing almost six million people into fuel poverty.
3. One-off windfall tax on oil and gas
Labour claim this would cut household bills up to £600 and help support businesses through this trying time.
A windfall tax targets the excess profits a company, or group of companies, did not expect to make. Here, it means oil and gas firms earning more as energy prices surge around the world due to the war in Ukraine would have to hand it over to the government.
IPPR also backs this measure, while calling for more investment into renewable power and for the government to fully endorse onshore wind power.
At the moment, the UK is vulnerable to the staggered progress on renewables, energy efficiency and energy storage.
However, Johnson has already dismissed the idea of a windfall tax, claiming increasing taxes would “stop investment” by oil and gas companies in the UK.
4. Emergency budget
Labour and the Liberal Democrats have pushed for the government to roll out an emergency budget.
Lib Dem Treasury spokesperson Christine Jardine said: “Millions of families and pensioners are struggling to get by. They need more help now before things get even worse in the autumn.”
She added: “An emergency budget is needed now to cut taxes for ordinary families while taxing the super profits of oil and gas companies.”
According to The Independent, Derek Lickorish, former chair of the government’s fuel poverty advisory group, also suggested that between eight and 10 million households need an extra £1,000 each to “get them through this very, very difficult period”.
He estimated that this would cost between £8 and £10 million, explaining: “Repayment of this sum is impossible for these consumers — it has to be a grant. These are exceptional circumstances. It’s going to have to go on the government’s credit card.”
5. Scrapping the national insurance rise
The hike in national insurance contributions has significantly added to the stress of the cost of living when it kicked in on April 6.
It meant workers had to pay more towards national insurance, as their tax climbed up from 1.25 percentage points from 12% to 13.25%.
Labour’s Jonathan Reynolds said: “The Conservatives’ decision to hike taxes during a cost of living crisis will make things even harder for businesses and families.”
The majority of the rise will be covered by key sectors such as manufacturing, while employers in the health and social care sector will face an extra £1billion in tax.
Martin McTague, national chair of the Federation of Small Businesses, said: “The small business tax burden is now at its greatest since the 1950s.”
Labour suggests that one-off windfall tax on profits instead of the national insurance increase would help the smaller firms who are more vulnerable.
6. Tackling insulation costs
IPPR has suggested the warm homes discount – one-off discount to your electricity bill for people on low incomes or those relying on pension credit – could be increased from £140 to £540.
This would help the 8.5 million households who are currently on the scheme.
In the long-term, the government could introduce £18 billion investment for home insulation and low carbon heating to cut the country’s energy bills.
Green Party MP Caroline Lucas has suggested a street-by-street home insulation programme would be more efficient, while also addressing the pressing climate crisis.
7. Addressing food accessibility
The yearly amount we spend on groceries is expected to rise by an average of £271, according to data analytics company Kantar.
To tackle this and prevent the rising levels of poverty, the government could cut tariffs on food which can’t be produced in Britain and has to be imported, like rice.
Local authorities have also called for the government to push a “cash first approach” to food insecurity, a technique also recommended by the Independent Food Aid Network.
Promoting a cash first approach would allow local authorities to provide direct, easy accessible cash payments to people struggling with the financial crisis, along with pushing for systemic changes which would increase social security payments and wages to mach the cost of living.
Is the Treasury already helping?
The government has announced a few measures to assist with the crisis, including a tax cut of more than £330 a year for the typical employee.
It has also lowered the Universal Credit taper rate to help people keep more of the money they earn and offered £350 to millions of households to assist with the energy bills.
There’s tax-free childcare for about £2,000 a year and pension credit, is worth around £3,300 a year, but critics believe none of these measures go far enough when it comes to alleviate the looming financial crisis.
Gove did hint that benefits could go up on Wednesday, saying Sunak and the work and pensions secretary Therese Coffey are “looking hard” at what they can do, but the government is yet to make an announcement in this sector.
What will happen if the government doesn’t do more?
Economic growth is expected to slow significantly, while 1.5 million households could end up struggling to pay food and energy bills in the next 12 months.
The UK would be pushed into a recession – meaning two consecutive quarters where the economy shrinks – while inflation is already at a 30-year high.
The Bank of England has even cautioned that inflation could rise 10% in the coming months and households would have even less disposable income.
“Without this targeted support, we expect a further increase in extreme poverty,” NIESR said, especially with the added squeeze from the Ukraine war.
It added that 250,000 households face “destitution” without immediate support.
Tony Danker of the Confederation of British Industry (CBI) also told the BBC Radio 4′s Today programme that Downing Street needs to incentivise people to invest now.
He suggested the government should cut business rates or subsidise the shift to clean energy, otherwise “the economy will end up in more trouble”.
Meanwhile, the Yorkshire Building Society has suggested households may face £100 per month shortfall by 2024.