“Enough is enough”. A common phrase when we think we have reached about as far as our ability to endure. Many of us would think – justifiably – that it applies to our cost-of-living crisis right now.
After watching coverage of yesterday’s Spring Statement, many of you might well have thought that it wasn’t “enough”. I have asked myself what “enough” would have looked like, and accept that perhaps it would have been unachievable.
I think the fairest analysis was that offered by Amanda Blanc, the Chief Executive of Aviva, who said yesterday that the announcements ‘won’t stop the cost-of-living pain but will make it a little more bearable for those who are feeling it most”.
There seems a disconnect right now, in both politics and wider society, between a belief that ‘something must be done’ (be it because of the economic impact of covid or Ukraine) and the consequences of what has been done over Covid, and the global economic consequences of both covid and Ukraine. Both have been external factors beyond the Government’s control, and are specifically responsible for the spike in inflation. Other countries are not having it any better – inflation as high as 8% in the US and producer prices going up an incredible 26% in Germany.
Acting as competent guardians of the nation’s finances so as to avoid hyper-inflation and sky high interest rates is not consistent with providing a comprehensive solution in each and every case to the differing groups in society seeking specific and fairly costly remedies for their specific situations. But it is about trying to address the worst aspects.
There were plenty of loud headlines on the front of the likes of the Daily Mail in recent days that the Chancellor had some £20 billion of headroom to play with. Or even £50 billion. This inflated expectations that there was money washing round, just waiting to be handed back. The figures arise because we are borrowing ‘only’ around £70-80 billion this year rather than a predicted £120 billion. For a Government that wants to ensure we borrow nothing by 2024-25 so as to protect from future tax rises, that can only be a good thing. This lower borrowing is because the economy has grown, and tax receipts have risen some £40 billion more than anticipated.
And as inflation rises, so does the cost of our debt repayments – some £5 billion higher in February alone.
And even if we accept there was £20 billion to play with, I could point out that some £9 billion was spent on measures to ease the cost of energy last month, some £6 billion yesterday on raising the National Insurance threshold, and around £3 billion on the 3.1% increase in the State Pension - with other smaller changes ensuring all that £20 billion can be accounted for.
You may ask what has any of that got to do with me. But without broader economic stability, we face an invidious choice between further bouts of austerity or painful tax rises.
One main change yesterday was knocking 5 pence off fuel duty. Of course, this can’t compensate for the price rises of recent weeks, and nor can it prevent any future increase in global oil prices. It is a bit of help though. As some may recall, the Government introduced the Fair Fuel Duty Stabiliser in 2011 meaning fuel duty has remained at 58p a litre. This has meant only around 55% of the cost of fuel is now tax compared with as much as 75% back in 2009.
I am also sympathetic to the argument that the petrol market is dysfunctional. I am less certain that a Quango can change that – it failed to do so during the 1973 oil crisis. What we need is more effective competition between fuel providers, and an end to any stitch up between local providers. Why are petrol prices on the Fylde some 10p a litre higher than when I visit my parents in Cheshire?
The takeover of ASDA by the people who also own Eurogarages has also ended the supermarket price wars we used to see which kept prices down. The answer is for the Competition & Markets Authority to undertake local area markets studies to identify those parts of the country where forecourt competition has broken down.
It remains an obvious point to make that switching to electric vehicles is a sensible move if it can be afforded. Prices are coming down but not by enough. Like many, I remain put off by the price, and the fear that there are insufficient charging points. And that is worsening – we had one charging point for every 16 electric vehicles a year ago, and now one for every 32. In the NW, it is more like one per 62 electric vehicles.
Of course, they still have to be charged and electricity is not getting cheaper, but home charging overnight could and should be given advantageous treatment in energy bills as it really helps the stability of the grid.
So the fact BP is investing £1bn in expanding its charging network is welcome news. I would far rather it did this (alongside investing in new North Sea oilfields) than paying that to the Chancellor as a windfall tax. Other energy companies need to follow suit and do a better job of showing how they can invest wisely.
My inbox this morning has had a few emails from those complaining that pensioners have received nothing.
I accept that superficially there is no headline-grabbing measure I can point at. Spring Statements are supposed to be about overall economic health – and welfare changes invariably occur during an autumn budget.
But I would point out that the 3.1% increase in the State Pension is about to occur – and I entirely accept that this is far below current inflation, and the disappointment many feel that the Triple Lock was suspended for a year.
We have at least had confirmation this week that the Triple Lock will be reinstated. The April 2023 increase will include inflation till September 2022, which could then be near its peak of 8 per cent or above. The triple lock will pay this, or even more if earnings growth is higher again. Without any government tinkering, this could put state pensioners on target for an 8 per cent plus increase in 2023, potentially the highest increase ever. Even if, inflation falls as predicted between autumn 2022 and spring 2023. I know there are some who doubt this commitment – I emphatically do not.
I am quite interested in the Institute for Fiscal Studies’ remedy on the challenge the gap between using September data for an April rise. They write:
“Indeed this could be an opportune moment to change the way that benefits are uprated over the longer term. The issue of real falls in benefit income when inflation rises (and real increases when inflation falls) occurs because benefits increase with a lagged measure of inflation. An alternative would be to use near-term forecasts for inflation to attempt to increase benefits in line with the actual annual rate of inflation that applies at the point of increase. This is what is already done with the uprating of excise duties. For administrative reasons Universal Credit has made it easier to change benefit rates at short notice, which also opens up the possibility of simply waiting until nearer to April before confirming the benefit uprating based on the latest inflation outturns available. For a long time now, with low and stable inflation, this would have seemed like a fairly minor technocratic change. But in the current environment it could make a real difference, and it would reduce the exposure of low-income households to similar problems in future”.
Whilst not adopted this time, I will keep on pushing for it a little more noisily than I have been.
I would also make one observation about a widely expected change that did not occur. It was widely expected he would remove the exemption of those above State Pension Age to pay National Insurance – and he didn’t.
Low income and/or vulnerable households
The big change here is obviously the increase in the threshold at which NI contributions are made – increasing from £9,600 to £12,570 at a cost of some £6 billion and saving the average family £330 a year, and lifting 2.2 million low earners out of the NI bracket overall. I am not sure it doesn’t need me to tell people that my constituency has the third lowest average salary in the country – so thousands of local families will benefit.
There is a potential kink in this – we have to ensure that those 2.2 million do not lose access to NI credits that underpin the state pension. I deal with far too many cases who took time away from work, so didn’t accrue sufficient credits to qualify for a full Basic State Pension. This will need addressing, and I am sure I won’t be the only one raising it.
One other highlight is the doubling of the Household Support Fund which I have campaigned for as part of my focus on ending destitution and the need for food banks. Standing at £1bn, this will now mean some £5 million available across the Fylde to support households experiencing financial pressures. I remain concerned that delivering this mainly through food banks may put some people off who might be eligible, so it will be important that access is as easy as possible – although these days, the signposting work that food banks do is as important as their role in providing emergency food aid.
Of course, the Household Support Fund isn’t the only source of assistance. I could list the Local Welfare Assistance Scheme, providing support via Section 17 of the Children’s Act 1989; the use of Discretionary Housing Payments, Council Tax Support and Section 13a discretionary Council Tax reductions; pension credit; accessing publicly-funded assistance from social housing providers; referring into Warm Homes teams; funding of Winter Fuel Allowance and Warm Homes Discounts; and Government-funded Holiday Activity & Food Schemes during school holidays.
That is just off the top of my head in thirty seconds – there will be many, many more. What perhaps concerns me is a lack of awareness, that these pots of support often go unspent if not enough apply and so an erroneous impression is created that nothing is occurring.
There was a lot to take in yesterday – especially around the wider economic situation. We could spend lots of taxpayers’ money today only to see the global situation worsen and that money to have made less difference.
Many of the solutions have to be medium term. I could write a whole article just on the choices we have in energy policy so we rely less on overseas imports. A little discussed area is how the price of basic food staples is rocketing up because of supply chain difficulties in the manufacture of fertilisers (relying on gas and potash) that has seen fertiliser costs for farmers rise tenfold. All that is about trying to tackle the underlying cost pressures.
So it has to be a mix of short-term help to those least able to weather the storm, and medium-term action to insulate ourselves from global instability.
Paul Maynard MP
Blackpool North & Cleveleys