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23 March 2022

Rishi Sunak ignored the easiest way to help the poorest

The Chancellor’s refusal to raise Universal Credit shows he has returned to his ideological comfort zone.

By Anoosh Chakelian

Britons are facing the biggest fall in living standards since 1956-57, but in his Spring Statement today (23 March) Rishi Sunak failed to help the hardest hit. Instead of making benefits more generous to shield households from spiralling inflation, the Chancellor focused on tax cuts that do not target the lowest earners.

The man whose emergency pandemic spending made him the most popular Westminster politician in the country – as he stumped up half the price of people’s restaurant meals in the summer of 2020 – is returning to his ideological comfort zone.

In his statement, the only targeted support Sunak announced for the poorest households was an additional £500m to the Household Support Fund: a fund he introduced at the end of last year partly to mitigate his own decision to remove the £20-a-week increase in Universal Credit.

The Household Support Fund, which he is doubling to £1bn, helps those struggling to afford food, utility bills and other essentials, with one-off payments. Unlike the intended simplicity of Universal Credit, which is supposed to roll all benefits into one, discretionary payments such as this have obscure eligibility requirements and complicated processes. Councils with limited resources struggle to administer them.

Working-age and pensioner benefits will only rise by 3.1 per cent – far below the forecast average inflation this year of 7.4 per cent. And while the Chancellor claimed his tax cuts would help working people, they do not benefit lower earners the most.

Increasing the National Insurance threshold from £9,600 to £12,570 – an old trick developed in the coalition years when the income tax personal allowance was raised – is actually a bigger tax cut for those on middle to higher incomes. “Only £1 in £3 of the benefit goes to the bottom half” of the income scale, calculates Torsten Bell of the Resolution Foundation. 

These measures aren’t enough for people with nothing left to cut as they struggle to budget for huge rises in energy and other bills.

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The Office for Budget Responsibility confirms this, finding that the policies announced by Sunak since last October’s Budget will only offset a third of the overall fall in living standards in the coming year. Inflation outpacing wage growth and net tax rises mean that real disposable income per person will fall by 2.2 per cent in 2022-23: the largest drop in a single year since ONS records began in the 1950s.

Sunak’s refusal to use Universal Credit to cushion this fall, as he did during the pandemic by introducing the £20-a-week uplift, exposes his ideological aversion to benefit rises – and pulling the most obvious lever to help the poorest.

[See also: “A KitKat is now a luxury”: the looming death of disposable income]

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