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5 September 2022

Liz Truss’s National Insurance cut would fail to help Britain’s poorest

The Tory front-runner’s proposal would save the poorest tenth of households just 76p per month.

By Ben van der Merwe

Liz Truss, the current favourite to succeed Boris Johnson as prime minister from September, is facing scrutiny over her plans to tackle the cost-of-living crisis.

Energy bills are set to more than double in October to £3,549 a year, before increasing further next April to £6,616. Truss has rejected calls for an increase in cash transfers to the UK’s most vulnerable households, dismissing such proposals as “handouts”. Instead, she has said her strategy would focus on reducing household expenditures through tax cuts.

However, new research from the Tony Blair Institute for Global Change suggests that Truss’s main proposal, a reversal of last April’s increase in National Insurance rates, would do almost nothing for those most impacted by the energy crisis.

The plan would save the poorest tenth of households just 76p per month, taking less than 2 per cent off their total cost-of-living increase. By contrast, the richest 10 per cent of households would save an average of £93, equivalent to 84 per cent of the increase in their cost of living.

Increases in the cost of living are expected to wipe 17.3 per cent off the incomes of Britain’s poorest households by April, absent any increase in support. Under Truss’s plan, Britain’s poorest households would see their net monthly expenditures rise by £48, while the richest would experience an increase of just £17.

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Ian Mulheirn, chief economist at the Tony Blair Institute, warned that low-income families are facing a “bleak winter and a worse spring”, and said that the ideas being proposed by Tory leadership candidates “will do almost nothing to help the people who are most exposed”.

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“A serious response will require the new prime minister to extend and expand [the former] chancellor [Rishi] Sunak’s support package [introduced in May, such as the additional £325 payment to those on means-tested benefits],” he said. “The cost will be in the tens of billions, but there is no alternative.”

[See also: The five big economic problems Liz Truss faces and how she plans to tackle them]