Sunday 21 August 2022

Helping the eaters or heaters

 Since the Elizabethan Poor Law of 1601 it has been accepted in Britain that it is the duty of the government to ensure, if not a comfortable, at least a minimum quality of life for those citizens who would otherwise be destitute. The 17th century central government craftily passed the responsibility, and the onus of paying for it, on to what passed for local government at the time.  Today it is seen as largely a central government responsibility.

The coming winter will bring a genuinely unprecedented* situation in which  many individuals and families will be forced towards destitution when the effects of double-digit inflation and the huge rise in energy costs are felt.

I feel that the proposals made so far by both government and opposition parties  are clumsy and inadequate.  The existing government has offered every household a grant of £400 to help pay the increased fuel charges.  With fuel price rises in the £1 000s that is peanuts in the context of "just managing" wages, and the rise in the prices of other essentials.  Liz Truss flip-flops between "no-handouts" along with tax cuts which will allegedly stimulate the economy, and the possibility of "maybe" (but unspecified ) handouts.  The Liberal Democrats and Labour have both proposed a freeze on the autumn price cap.  (The Liberals got in first but Labour has received most publicity.)

None of these proposals really tackle the problem.

My proposal is for much more substantial, but targetted, government help to the poorest.  

 I know the Labour Party is, with good reason, opposed to targetting because it involves means testing, which can be both unfair  and humiliating.  Be that as it many, I feel it is foolish, at a time when our health services, care services, education and children's services and most local government services are desperate for additional funding, and there will be inevitable demands for increased provision for the armed forces,to scatter government money on people like me, and many other much, some very much, richer who can cope with the price increases perfectly well. 

For a start I would restore the social credit "uplift" by at least the original  £20, and preferably £30 or even £40, and increase all social security payments other than pensions by the rate of inflation plus 5%.

Then I would give lump sum assistance (say £200 per month) to everyone whose income is so low that they are not liable to pay income tax.  In that way the hassle and humiliation of means testing is avoided.

The basic rate tax threshold  is a  rough and ready measure, but it is one that already  exists.  There is also the problem of "sudden death" at the margin.  Perhaps those who pay income tax only at the standard rate could receive a  reduced sum, such as £50 a month.  A proportion  of the cost could be financed by stopping the payment of the Winter Fuel Allowance to pensioners such as me, whose pension are sufficient to make us liable to income tax, so we don't need the extra help.  One of my more affluent friends calls it his "winter wine allowance."

As outlined in previous posts, there are plenty of assets and activities the effective taxation of which would not unduly affect demand and sustainable growth (land, profits, capital gains, inheritances, financial transactions, windfall taxes.)

The above figures are off the top of my head and uncosted, but are offered as a suggestion.  A government anxious to protect its citizens from penury would order the Treasury to start work now on this or similar schemes, ready for implementation before the cold weather sets in.

* Throughout the pandemic minister after minister excused their importance by claiming the situation to be unprecedented. It wasn't.  The Cygnus exercise predicted almost exactly such a situation but its findings were ignored.  The fuel price rise along with double digit inflation does, however, merit the adjective, certainly for peacetime.  Some have called it a "humanitarian crisis," the sort of situation for which a Churchill would have called for "Action this day."

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