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Mini-Budget ‘fails miserably’ to meet low-income families’ needs, says Children’s Society chief

23 September 2022


The Chancellor, Kwasi Kwarteng, speaks about the Government’s “Growth Plan” in the House of Commons, on Friday

The Chancellor, Kwasi Kwarteng, speaks about the Government’s “Growth Plan” in the House of Commons, on Friday

THE Government’s economic “Growth Plan”, unveiled by the Chancellor, Kwasi Kwarteng, on Friday, falls far short of what is needed to help people struggling with the cost-of-living crisis, Christian campaigners have said.

The plan, which Mr Kwarteng set out in the House of Commons, includes abolishing the cap on bankers’ bonuses; overturning the planned rise in National Insurance contributions and corporation tax; a single higher rate of income tax at 40 per cent; and a reduction of one per cent in the general rate from April 2023.

After his speech, the pound fell to a record low against the dollar on Monday. The Bank of England announced on Wednesday that it would intervene to calm financial markets, after Mr Kwarteng’s taxcutting announcements sparked a fall in sterling and a surge in borrowing costs. The Bank said that it would start to buy government bonds at an “urgent pace” to help to restore “orderly market conditions”.

Under new proposals, an atttempt to “entice people to join the labour market” will be made by reducing the benefits of claimants of Universal Credit: 120,000 people will be instructed to seek more and better-paid work, or have those benefits reduced.

In the light of increasing strike action over wages, the bargaining power of trade unions is to be limited. The Government will legislate to require unions to put pay offers to a vote. Strikes will be allowed to go ahead only once genuine negotiations have broken down.

“Investment zones” are to be introduced, with land released to accelerate development, accompanied by tax relief on buildings, plant, and machinery. The Government is in discussion with 40 regions, including the Tees Valley, the West Midlands, and the West of England. “We have to unleash the power of the private sector,” Mr Kwarteng said.

Responding to the Chancellor’s plans, the chief executive of the Children’s Society, Mark Russell, said that families bearing the brunt of the cost-of-living crisis needed far more targeted support.

He accused the Government of “spending billions in handouts to benefit those on the highest incomes, but failing miserably to meet the needs of families on the lowest incomes who will still be struggling to heat their homes this winter”.

Mr Russell continued: “What is glaringly absent from today’s announcement is any targeted support for the hardest-hit families. In the week we released our Good Childhood Report [News, 23 September] revealing the damaging decline in children’s well-being, this is a shocking omission — and we are now calling on the Government to take swift follow up action for these children facing a cold hungry Christmas.”

In the Commons on Friday, the Chancellor defended his action on bankers’ bonuses. “A strong UK economy has always depended on a strong financial-services sector,” he said. All that the bonus cap had done, he argued, was to increase bankers’ basic salaries and drive financial business out of of Europe. “We want this country to be an entrepreneurial, share-owning democracy,” he declared.

Tax was “central to solving the riddle of growth”. He promised a review to make the system simpler and more dynamic. Not increasing corporation tax would put £90 billion back into the economy, he said.

He went on to speak of the planning system as too slow and fragmented, and announced bringing forward a new Bill to unpick the complex system of regulation. A report, due to be published today, would present information on infrastructure projects involving the disposal of surplus government land to build new homes, he said.

Mr Kwarteng defended using increased borrowing — predicted to be around £100 billion a year by the mid 2020s — to fund the Energy Bill proposals. In a global energy crisis, it was “totally appropriate for the Government to use its borrowing powers”, he said. The price of inaction would been far greater. He repeated frequently, to shouts from the Opposition, that this was “a new era”.

The mini-budget failed to tackle the cost-of-living crisis, Christian Aid on Friday. The charity’s head of campaigns and UK advocacy, Pete Moorey, said: “The cost-of-living crisis is devastating for the poorest people in the UK and globally. For millions of people living with drought and struggling to buy food in East Africa and in many other parts of the world, it is catastrophic.

“We should not have to choose between responding at home and fulfilling our responsibilities to the world’s poorest people facing extreme hunger. The Chancellor should ensure the UK is a world leader by helping the millions of people on the brink of famine in East Africa with a swift reversal of cuts to international aid and action to tackle the impacts of the climate crisis.”

Churches, as voluntary-sector organisations, will benefit from the already announced Energy Bill Relief Scheme (EBRS), through which the Government will provide a discount on wholesale energy and gas prices for an initial six-month period. The move, it says, is designed to “support growth, prevent unnecessary insolvencies and protect jobs”.

The energy-price guarantee will limit the unit price of gas and electricity to £2500 for a typical household, saving it around £1000 a year. The EBRS scheme was intended to reduce inflation by five percentage points, the Chancellor said in his statement.

The Bishop of Durham, the Rt Revd Paul Butler, who chairs the inter-denominational ChurchWorks Commission for Covid Recovery, had already welcomed the action. “Churches are not only centres of worship and pastoral care, but many provide services to people struggling with the cost of living crisis, such as foodbanks that will be key sources of practical support over the coming winter months,” he said.

One thousand churches have already signed up to ChurchWorks’ Warm Welcome campaign to provide a warm space for the one in four people forecast to be unable to afford the new energy bills. The campaign, launched this week and backed by the former Prime Minister, Gordon Brown, seeks to ensure that on any day of the week, those in need can find a warm location and a friendly welcome.

The Labour MP of Stalybridge and Hyde, Jonathan Reynolds, asked an urgent question in the House of Commons on Thursday about government support for businesses that face rising energy prices. The Labour MP for York Central, Rachael Maskell, asked: “Many churches and charities in my constituency will expend more energy over the coming months because they are providing warm banks. What additional support will they be able to apply for so that they can provide the resilience our communities need?”

The Secretary of State for Business, Energy and Industrial Strategy, Jacob Rees-Mogg, answered briefly: “This support is comprehensive across the domestic sector.”

Fifty representatives of faith groups, charities, trade unions, and front-line organisations. including Church Action on Poverty, published an open letter to the Prime Minister on Wednesday. It warns that, without substantial support, the least well off will be dragged into destitution.

“It is the urgent, moral responsibility of the Prime Minister to ensure that people on the lowest incomes have enough to live on in the months ahead,” they write. “Spiralling costs are affecting everyone, but for those who were already fighting to keep their heads above water, this winter’s challenges will be a matter of life and death.”

The letter came in the context of analysis by Professor Donald Hirsch published on Wednesday. This indicated that the average family of four in receipt of Universal Credit would still need an additional £1391 over the next six months to remain warm and fed.

“Increases in poverty and destitution because of this crisis are not inevitable, if government, business and civil society recognise that this is an emergency and act now,” the letter says. ”We believe that concerted action can turn the tide on poverty, see us through this winter and put us on the path to a poverty-free Britain. The government has the tools to deliver this at their disposal, and they must use them now.”

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