Advertisement
Social Justice

‘Just write millions of cheques’: Economists call for cash payments to ease cost of living crisis

A US-style stimulus system giving people up to £500 would go further to slow the cost of living crisis than a VAT cut, a thinktank said.

Rishi Sunak should give out one-off cash payments to millions of people to tackle the cost of living crisis, according to a leading thinktank. 

Simple payments of up to £500 would be the most effective solution to soaring inflation in the short-term, said Dr Aveek Bhattacharya – chief economist at the cross-party Social Market Foundation – and would let families decide how best to spend the money.

Office for National Statistics figures released this week showed the cost of living increased at its fastest rate in 30 years last month, squeezing household finances with energy bill rises of an average 50 per cent predicted for April.

Thousands of families are already being forced to choose between eating and heating their homes, experts warned, with millions set to plunge into similar hardship without fast government action.

One-off payments to people on the lowest incomes is one of several options being considered by the Treasury to ease pressure on household budgets, according to The Sun, though government sources warned it would be complex to set up.

“The coming cost of living crisis leaves millions of households facing severe hardship, and many millions more feeling significant pressure on their finances,” Bhattacharya said.

Advertisement
Advertisement

“It is clear that some action is needed, but the government should avoid the temptation to over-complicate its response and muddle its environmental objectives by subsidising energy.”

Low- and middle-income households should be given a £300 cheque, the economist explained, plus an extra £200 for people on universal credit or legacy benefits.

This package worth £8.5bn would be a better solution than alternatives such as cutting VAT on domestic energy bills or subsidising fuel companies, he said, which risked having an environmental impact by encouraging people to use more energy.

Sunak is reportedly considering a deal with energy companies to lower the price cap, costing around £20bn.

Establishing a US-style stimulus system would also mean the infrastructure would already be in place to respond quickly to future economic crises, Bhattacharya said, and payments could be staggered over a period of months to avoid contributing to escalating inflation.

The Trump administration did not introduce furlough schemes or increase existing benefits to help the US population through the pandemic, instead giving one-off “helicopter money” payments to those on low incomes.

The UK government should make similar direct cash payments to households and “leave them to figure out how best to address their needs,” the economist added. 

“A ‘cost of living bonus’, with a higher payment for those on low incomes, would do a lot to help struggling families and clearly demonstrate that the government is on their side.”

Anti-poverty experts also called for emergency payments to meet the immediate needs of families struggling to stay afloat – as well as reforms to the UK’s patchy welfare system.

“For those on low incomes, even small increases risk pulling them deeper into poverty, with the support available through the social security system proving inadequate to protect families from harm,” said Rebecca McDonald, senior economist at the Joseph Rowntree Foundation.

“Urgent and targeted support for people in poverty is essential if families in this country are to bear the shock of this latest rise to their cost of living.”

The government will increase basic benefit rates by 3.1 per cent this April, ministers have announced, well short of the projected 6 per cent inflation Bank of England economists have predicted. 

But in the same month, changes to the energy price cap will see fuel bills soar and national insurance payments will increase as the government triggers its new health and social care levy.

Advertisement

Buy a Big Issue Vendor Support Kit

This Christmas, give a Big Issue vendor the tools to keep themselves warm, dry, fed, earning and progressing.

Recommended for you

Read All
My son mysteriously vanished 17 years ago – Christmas is just another reminder he's gone
andrew gosden, who went missing 17 years ago
Missing people

My son mysteriously vanished 17 years ago – Christmas is just another reminder he's gone

These domestic abuse survivors are learning how to cycle. It helps them find freedom and hope
Lucy Dance, who runs the cycling project in the women's refuge. Image: Supplied
Cycling

These domestic abuse survivors are learning how to cycle. It helps them find freedom and hope

'You want it to be magical for your kids': Here's how the two-child benefit cap is ruining Christmas
Two-child benefit cap

'You want it to be magical for your kids': Here's how the two-child benefit cap is ruining Christmas

Millions of pensioners in 'desperate need' lose winter fuel payment: 'We fear what will happen'
pensioner with his head in his hands
Winter fuel payment

Millions of pensioners in 'desperate need' lose winter fuel payment: 'We fear what will happen'

Most Popular

Read All
Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits
Renters: A mortgage lender's window advertising buy-to-let products
1.

Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal
Pound coins on a piece of paper with disability living allowancve
2.

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal

Cost of living payment 2024: Where to get help now the scheme is over
next dwp cost of living payment 2023
3.

Cost of living payment 2024: Where to get help now the scheme is over

Citroën Ami: the tiny electric vehicle driving change with The Big Issue
4.

Citroën Ami: the tiny electric vehicle driving change with The Big Issue