Rishi Sunak unveils a new plan to ease Britain’s cost-of-living squeeze
EconomistSep 09, 2022
The Facts
On Thu., UK Chancellor Rishi Sunak announced a £21B package to support British households through a cost of living crisis as the country is fighting its highest inflation rate in 40 years.
The measures include a £300 payment to 8M pensioner households, a one-off £650 payment to the 8M UK households on welfare benefits, and £150 payment to people on disability benefits.
The Spin
Left narrative
Despite criticisms that a windfall tax is "economically illiterate," the reality is that it's economically sensible: a huge spike in oil and gas prices is being passed on to UK consumers, with those on low incomes catastrophically hit, while oil giants profit. Taxing some of these profits to provide relief to low-income energy bill payers is the right move to rebalance the costs and benefits.
Right narrative
At best, the new package will provide nothing more than temporary relief that fails to address global supply shocks and other systemic issues. At worst, it will discourage investment in the UK, result in greater reliance on foreign energy sources which will lead to higher consumer prices, and diminish company shareholder's profits - including the very pensioners Sunak claims he wants to help.
Narrative C
The chancellor's windfall tax is a swing and a miss that fails to tackle the cost of living crisis and the climate emergency together. The tax relief stipulation means that oil giants can largely escape taxation by reinvesting their profits in what will most likely be oil and gas infrastructure. This will incentivize further oil and gas production and fail to boost clean energy.
