Finance Secretary Kate Forbes, of the Scottish government, made a number of suggestions to help households and businesses who are struggling to cope with inflation.
With inflation reaching a 40-year high of 9 per cent, and forecast to rise higher, Ms Forbes has written to the Chancellor of the Exchequer urging the UK Government to use the £30 billion fiscal headroom it has available to help those struggling in the face of rising bills.
Her suggestions are reproduced below.
“I am proposing four principles that should guide a response from the UK Government:
“Firstly, ensure that the fiscal support package is targeted at the households and businesses that most need support. The package should aim to offset the disproportionate burden of the cost-of-living crisis on the least well-off, and I would urge you to consider as a starting point of any package:
- An emergency cost of living cash payment to all UK households with below median income, tapered to provide more support to those at the lower end of the income distribution. I would suggest this be up to £1,000 to those on the lowest incomes, to be delivered directly as cash support at periods across the fiscal year. Providing money directly, without a link to specific bills, would provide households with the means to manage the cost-of-living crisis however it is affecting them the most, whether it is on food, transport or energy bills, and offset the impact of the cost-of-living crisis for those on the lowest incomes. The Resolution Foundation has also called for a policy intervention of a similar design.
- Permanently uprate all social security benefits as if they had been increased by 10% in April to match the current level of inflation, as proposed by the Centre for Social Justice. In April, we increased our eight Scottish social security benefits by 6%, reflecting the higher inflation expected at that time.
- A further £25 uplift to Universal Credit, and for this to be extended to legacy benefits.
- Increase the National Living Wage rate of £9.50 to the Real Living Wage rate of £9.90 for all over eighteen.
- A temporary suspension of VAT on household energy bills, which we estimate would save the average household around £100 a year at current prices.
- Extend the £350 energy rebate scheme to small and medium enterprises and remove the requirement to repay to the £200 energy bill reduction component.
- Remove standing charges for anyone with a pre-payment meter. The energy price increases will be felt more severely for consumers using prepayment meters who are often subject to higher prices for energy than through other means such as direct debit, and as standing charges must still be paid even if there is no credit on the meter, and top ups can be swallowed up before energy can be bought. Removing standing charges would reduce the risk of self-disconnection if they cannot afford their energy costs.
“Collectively, we estimate this package can be comfortably implemented within the £30 billion fiscal headroom available to you, even before allowing for any additional revenue from a windfall tax.”
It will be interesting to see if the Treasury respond to these ideas or any others aimed at reducing the current cost of living crisis.