How will the rising cost of living affect the Scottish Budget in 2023-24? Will the Scottish Government’s proposals for reforming the public service deliver the efficiencies expected?
The committee is seeking views from organisations and the public to inform its pre-budget scrutiny work, prior to the Scottish Government publishing its 2023/24 budget later this year.
Committee Convener Kenneth Gibson MSP said: “The next Scottish Budget will be challenging as the current cost-of-living crisis impacts on Scotland.
The Committee is therefore keen to hear from organisations and individuals how the Scottish Government’s Budget in 2023-24 should respond to this crisis.
“We also want to hear views on how the government’s proposed reform of the public service will support its future spending plans.”
Mr Gibson concluded: “Using the government’s resource spending review announced in May, we will focus our pre-budget scrutiny on the proposals for reforming the public service, the impact of the cost of living crisis on the Scottish Budget, and how spending priorities might affect the delivery of national outcomes.”
More than eight million households across the whole of the UK will get a cash payment from July to ease cost of living pressures, Work and Pensions Secretary Thérèse Coffey set out detailed plans yesterday.
Millions will receive the first of two cost of living instalments totalling £650 from 14 July 2022, part of the £1,200 support package this year
Initial automatic instalment will be £326, with the rest to follow in a second instalment in the autumn
Comes as part of £37 billion government package to help families with cost of living pressures
The first instalment of the £650 for qualifying low income households in England, Wales, Scotland and Northern Ireland will land in bank accounts from 14 July 2022, continuing to the end of the month.
The move will see millions of households initially £326 better off as the government delivers significant interventions to support groups who are most vulnerable to rising costs. In total, millions of households will receive at least £1,200 from the government this year to help cover rising costs.
Work and Pensions Secretary, Thérèse Coffey said: “With millions of the lowest-income households soon seeing the first of two cash instalments land into their bank accounts, we are taking action to directly help families with the cost of living.
“This one-off payment totalling £650 is part of our £37 billion cost of living support package that will put an extra £1,200 into the pockets of those most in need.”
Chancellor of the Exchequer, Rishi Sunak added: “We have a responsibility to protect those who are paying the highest price for rising inflation, and we are stepping up to help.
“In July over 8 million people will get their first £326 payment to help with rising prices, as part of a package worth at least £1,200 for vulnerable families. I said we would stand by people when they needed help, and we are.”
The second instalment of £324 will be sent to qualifying low income households in the Autumn. The payments are designed to be deliberately slightly unequal to minimise fraud risks from those who may seek to exploit this system.
The eligibility date for the second instalment will be announced soon.
Low-income households are benefiting from government support in a variety of different ways this year as global inflationary pressures, exacerbated by the unjust war in Ukraine, have caused prices to rise for several essentials.
The government understands that many people are worried about the impact these rising prices will have on their household finances, which is why £37 billion of support is being provided to boost budgets and mitigate the worst of these pressures.
Support includes the direct payment of £650 for over 8 million households on benefits, a separate £300 payment for pensioners, and a £150 payment for disabled people, which can be paid on top of the £650 payment.
This is on top of £400 for all households to help with energy bills, and an extra £150 for properties in Council Tax bands A-D, meaning millions of the lowest-income households will receive at least £1,200 in support this year.
This is all in addition to changes to the Universal Credit taper rate and work allowances worth £1,000 a year on average for 1.7 million working claimants, a rise in the National Living Wage to £9.50 an hour, and a tax cut for around 30 million workers through a rise in National Insurance contribution thresholds.
The government has also expanded support for the Household Support Fund – which helps people with food and energy bills – with an extra £421 million, on top of £79 million for devolved nations; the total value of this support now stands at £1.5 billion. Fuel duty was also cut by 5p per litre for 12 months in March 2022, and alcohol duty has been frozen for 2022/23.
You can read more about the UK Government’s cost of living support and what is available here.
Edinburgh Pentlands MSP Gordon Macdonald has welcomed the planned introduction of the new Low Income Winter Heating Assistance benefit to help households both across the Edinburgh Pentlands constituency and the wider city pay their energy bills.
The support is being introduced by the SNP Scottish Government and will guarantee an annual payment of £50 to around 400,000 low income households from February 2023.
It replaces the UK government’s Cold Weather payments which were only triggered during a ‘cold spell’ of seven consecutive days below zero degrees, whilst the new payment from the Scottish Government will provide a reliable, stable guaranteed payment in winter, no matter the weather.
It will be the thirteenth social security payment introduced by the SNP Scottish Government and will be only available in Scotland.
Commenting, Gordon Macdonald said: “The SNP Scottish Government is providing a guaranteed payment of £50 to low-income households across Edinburgh to help pay their energy bills every winter, starting in February 2023.
“Once again the SNP Scottish Government is stepping up to support households within its limited budget, and despite the majority of powers lying with the Tories at Westminster.
“The Scottish Government’s annual £20m investment will mean households will get an automatic payment. The UK Cold Weather payments only reached 11,000 households in 2021/22.
“As the Scottish Government continues to step up and provide support to households across Scotland, it does so with one hand tied behind its back by the UK Tory government.
“That is why it is only with the full powers of independence can we start to build a fairer, more equal country.”
Public sector workers seem set on a collision course with local and national government over inadequate wage rises …
The General Secretary Designate of teachers union the EIS yesterday urged all of Scotland’s teachers to get active in the campaign to secure a 10% pay rise.
Ms Bradley addressed delegates on the final day of the EIS Annual General Meeting (AGM) at Dundee Caird Hall, and just ahead of a rally in support of the EIS ‘Pay Attention’ Campaign in the Civic Square outside the conference venue.
Addressing the AGM, Ms Bradley said, “The obvious and pressing priority is our Pay Attention campaign. We’ve staked our claim, nailed our colours to the mast … now we need to win.
“Listening to our speakers on the issue of pay over the last few days, I know we’ve got what it takes to win this. To win it because it’s simply unacceptable that teachers and other public sector workers would be expected to bear the burden of yet another crisis that’s been created by the economic vandalism of the Tory government and a Cabinet of millionaires …utterly morally bankrupt and more intent on callous racketeering and profiteering than they are on caring about people and supporting recovery.”
“We can’t allow COSLA to peddle the myth of the One Workforce agenda. Or the Scottish Government to quietly sit there on the side-lines being let off the hook by a raft of egalitarian-sounding rhetoric that’s in truth about pay suppression for teachers and by dint of that the rest of the public sector. We know One Workforce is utter fallacy and I have a sense that the other public sector unions know it as well.”
“If we’re to win a pay rise that protects teachers’ incomes from the worst of the cost of living increases, from every corner of the union, we need to keep building what will be a formidable display of our union strength. We’ve started building this – the press statements, the campaign materials, the branch meetings, the petition, the social media activity, and the demo outside this building later this morning.”
“With full-blown organising, comms and political campaigning… synchronicity of actions with local associations, we’ll be ballot ready, strike ready by October and with a strong industrial action strategy mapped out so that we’re strike ready and strike able.
“From the speeches and applause that we’ve heard this AGM about pay and the other inter-related injustices it sounds like you’re well up for taking this on …and so am I!”
COSLA STATEMENT ON PAY NEGOTIATIONS
COSLA is deeply disappointed that the First Minister and Cabinet Secretary for Finance have refused the request of all Council Leaders to engage in discussions regarding the current settlement for Local Government and its significant impact on our ongoing pay negotiations.
The implications of the Scottish Government’s spending plans for the rest of the parliament are deeply concerning for communities across Scotland and have further increased the already strong likelihood of industrial action in the coming months.
Scottish Government continues to fail to respect the fundamental role Local Government and its workforce has in addressing their own priorities of tackling child poverty, climate change and a stronger economy.
The ‘Resource Spending Review’, published on 31 May, shows that Local Government’s core funding for the next 3 years will remain static at time when inflation and energy costs are soaring.
This “flat-cash” scenario gives no scope to recognising the essential work of our staff, whose expectations, quite rightly, are being influenced by Scottish Government’s decisions in relation to other parts of the public sector. A suggestion that increases in welfare payments will mitigate the cost of living crisis do not recognise that our staff should not have to depend on such payments to make ends meet.
As things stand, the only option available to Councils is yet fewer jobs and cuts to services that are essential to communities everywhere.
COSLA’s Resources Spokesperson Gail Macgregor said: “COSLA, every year, argues for fair funding for Local Government to maintain the essential services our communities rely on.
“No increase in our core funding damages these services and limits the options we have in successfully concluding pay negotiations. Refusal to engage in discussion will only see this continue and our communities will see and feel the difference.”
The Fraser of Allander Institute has recognised the impact on councils: “The local government budget will decline by 7% in real terms between 2022/23 and 2026/27 … the real terms erosion of the funding allocations of local authorities represents the continuation of a longer trend.”
UNISON, Scotland’s largest local government union, will be balloting its members in a dispute over pay. The union is planning targeted strike action – this means select groups of workers will be balloted.
UNISON is campaigning for a pay rise for ALL local government workers.
The groups that will be balloted for strike action are members employed working in schools, who provide services to the running and operation of the school, and all members working in early years and in waste and recycling services. The union is recommending that vote ‘YES’ in favour of strike action.
The ballot will run from 10 June and will close on 26 July. It is vital that all ballots are posted back in good time to ensure we receive them by closing date.
Why are we balloting?
Having consistently worked above and beyond to keep our key services going over the past two years of the pandemic, and with the cost of living spiralling, COSLA’s offer of a 2 per cent pay increase for local government workers is nothing short of an insult.
While politicians have raced to praise your efforts their warm words have not been matched by action.
Earlier this year we ran an online consultation to see what you and other local government members thought of the employers’ 2022 pay offer. It was no surprise that the overwhelming majority of you voted to reject the offer and indicated your willingness to take action to achieve a better deal.
Nothing has changed since then and we now need you to vote YES to take strike action to remind your employers exactly how you feel.
This offer is derisory. It is less than the Scottish Public Sector Pay policy, falls far short of our pay claim and is significantly below current levels of inflation. It will exacerbate the gap between those on the lowest and those on the highest rates of pay.
And it is in sharp contrast to the 5.2% increase that councillors themselves have just received from 1st April 2022.
GMB Scotland has attacked “failure at all levels of government” as an industrial action ballot across local government gets underway this morning (Monday 6 June) against the threats of a 2 per cent pay offer and swingeing cuts to local jobs and services.
Nearly 10,000 GMB members in waste and cleansing and schools and early years services will be asked if they back strikes in the face of a pay offer from employer body COSLA amounting to less than £10 a week for staff earning under £25,000 a year.
Joint trade unions in local government wrote to the First Minister and the Finance Secretary last week seeking urgent talks and warned about the consequences for council workers of significantly below inflation pay with the cost of living at a forty-year high.
The ballot, which runs throughout the summer until Tuesday 26 July, also takes place amid dire forecasts for local government budgets following the Scottish Government’s spending review plans.
GMB Scotland Senior Organiser Keir Greenaway warned: “Council workers and the vital services they deliver are firmly in the sights of Kate Forbes’s cuts agenda, and if left unchallenged the lowest paid will pay the highest price in the biggest cost-of-living crisis for 40 years.
“This is what years of failure at all levels of government looks like – a decade of failed austerity, the passing on of cuts to communities, and a meek acceptance of the consequences locally. It’s a far cry from the doorstep applause of virtue-signalling political leaders just two years ago.
“It shows everyone there are no political superheroes and if you want wages that confront soaring inflation then you need to organise and fight for it.
“That’s exactly what our members are doing and unless an improved pay offer is tabled then industrial action looks inevitable.”
RMT launch 3 days of national strike action across the railway network
Over 50,000 railway workers will walkout as part of 3 days of national strike action later this month, in the biggest dispute on the network since 1989.
The union will shut down the country’s railway network on 21st, 23rd and 25th June, due to the inability of the rail employers to come to a negotiated settlement with RMT.
Network Rail and the train operating companies have subjected their staff to multiyear pay freezes and plan to cut thousands of jobs which will make the railways unsafe.
Despite intense talks with the rail bosses, RMT has not been able to secure a pay proposal nor a guarantee of no compulsory redundancies.
In a separate dispute over pensions and job losses, London Underground RMT members will take strike action on June 21st.
RMT general secretary Mick Lynch said: “Railway workers have been treated appallingly and despite our best efforts in negotiations, the rail industry with the support of the government has failed to take their concerns seriously.
“We have a cost-of-living crisis, and it is unacceptable for railway workers to either lose their jobs or face another year of a pay freeze when inflation is at 11.1pc and rising.
“Our union will now embark on a sustained campaign of industrial action which will shut down the railway system.
“Rail companies are making at least £500m a year in profits, whilst fat cat rail bosses have been paid millions during the Covid-19 pandemic.
“This unfairness is fuelling our members anger and their determination to win a fair settlement.
“RMT is open to meaningful negotiations with rail bosses and ministers, but they will need to come up with new proposals to prevent months of disruption on our railways.”
A snap poll from the Trades Union Congress (TUC) and Opinium showed the cost of living was the top issue for 75% of the Scottish electorate when casting their ballot in May.
This was followed by 60% citing the NHS as their primary concern, with public services (21%), housing (15%), Brexit (20%) and the environment (19%) all taking voter preference over the constitution (14%).
The news was cited as a ‘wake-up call’ from the Scottish Trades Union Congress leader Roz Foyer, who will host a specific cost of living crisis summit on June 17th with the Poverty Alliance.
Ms Foyer said: “These elections should be a wake-up call to all levels of government – local, Scottish and UK – that workers throughout the country need urgent and sustained help in the face of this brutal attack on their living standards.
“By far and away, with 75% of the electorate in Scotland citing the cost of living crisis as their top concern, with health, housing and the environment their taking preference over the constitution, all incoming councillors must make this their most urgent priority.
“Our local government manifesto made clear we need sustained investment from the Scottish Government to local authorities throughout the country, helping to deliver a real terms pay increase for our public sector workers. This is in addition to delivering on rent freezes, settling equal pay disputes and introducing universal free school meals throughout the country.
“This is the type of real terms action we need from councillors and government throughout Scotland. Our movement, with affiliates currently balloting for industrial action across the country, are not standing idle whilst workers face this material threat to their living conditions.”
Two renowned East Lothian businesses are working together to offer more people in the local community who are struggling with the cost-of-living crisis an opportunity to enjoy a fun day out.
Musselburgh Racecourse is partnering with S.Luca to offer racegoers a discounted meal when they purchase a concession ticket at the racecourse over the next three months.
Anyone who purchases a concession ticket will be able to present this at the Musselburgh branch of S. Luca to get a 10% off their meal. S. Luca is also offering a free ice cream for all kids who attend the races over this Jubilee weekend.
Concession tickets will be reduced to £15 over both days of the Jubilee weekend, saving £15 on Saturday and £10.00 on Sunday. This discount will continue over the next three months except for Ladies Day in August. All Saturday 4th June concession racegoers will receive a complimentary concession ticket to Sunday 5th June.
Bill Farnsworth, General Manager at Musselburgh Racecourse, said: “In a bid to help the local community during this difficult period, we were keen to partner with our friends at S.Luca to provide an offer over the summer that would help as many people locally get access to a fun day out.
“We hope this offer over the next three months allows more people, particularly those who have been hit the hardest to come along and enjoy their day at the races with a delicious meal at the end of it.”
Jane McGhie at S.Luca, added: “We’re delighted to be working with Musselburgh Racecourse to offer discount to those who are going along to the races this summer. We want to do everything we can to keep costs down for people at a time when prices are high across the most basic amenities.”
The concession ticket (£15 on all days except for Ladies Day) offer will continue for three months (finish end of August) and can only be purchased at the gate on race day with a form of valid ID.
HOUSEHOLDS ACROSS EDINBURGH TO BE SUPPORTED BY £23 BILLION
As communities across Edinburgh recover from the pandemic and face a Tory made cost of living crisis, yesterday the SNP Government’s spending review outlined record social security spending to help households facing increasing pressures. The Scottish Government allocated around £23 billion for social security over the course of the parliament.
The focus on supporting households under increasing pressure reflects the SNP’s commitment to create a fairer Scotland by tackling child poverty, reducing inequalities and supporting financial wellbeing in Edinburgh, and builds on current efforts to help families and mitigate Westminster welfare cuts.
The Resource Spending Review outlined over £23 billion worth of payments, with a total of almost £1.8 billion for the ‘game changing’ Scottish Child Payment alone. By 2026-27 the budget for Social Security Assistance will have increased by £6.3 billion.
This is despite the Scottish Budget for this year being cut in real terms by 5.2 per cent by the Tory UK government and the SNP government already spending almost £770 million on cost of living support, including several measures for families in Edinburgh not available elsewhere in the UK, such as:
Doubling the ‘game changing’ Scottish Child Payment to £20 per child per week with plans to increase it to £25 and extend it to under 16s by the end of the year – reaching a possible 450,00 young people.
Investing £86m to mitigate the Tory Government bedroom tax and benefit cap and support 90,00 people in their tenancies
Uprating eight Scottish social security payments by 6 per cent
A brand new Low-Income Winter Heating benefit that guarantees a £50 annual payment to over 400,000 low income households in winter 22/23
The Carers Allowance Supplement which will support around 90,000 carers with an additional £450 a year
Providing everyone in primaries one to five and over 140,000 eligible children and young people access to a free school lunch
Making free bus travel available for nearly half of Scotland’s population through concessionary travel
Additionally, the Scottish Government is making investment in areas like energy efficiency to bring down costs and the spending review set out how the SNP will build on these over the coming years.
SNP MSP for Edinburgh Pentlands, Gordon MacDonald, said: ““I am very glad to see this record investment in social security by the SNP Government, putting such a strong focus on tackling child poverty and helping households both across the Edinburgh Pentlands constituency and the wider city who are facing severe pressures right now which seems likely to only increase for the next while.
“Many families across Edinburgh are already benefitting from support like the Scottish Child payment, a £150 council tax reduction, the Scottish Welfare Fund and Discretionary Housing Payments which mitigate Westminster’s cruel bedroom tax.
“These are policies that build on the SNP’s current efforts. They will make a real difference to people’s lives and build on long standing measures that we benefit from every day – such as free prescriptions, free university tuition, free personal care, and 1,140 hours of free early learning and childcare which will continue to be maintained.
“When times are tough, Governments have to make tough decisions and I’m grateful the SNP government continue to focus on what matters most to people but, it is acting with one hand tied behind its back as Westminster continues to inflict its cruel austerity agenda at a time when people need support the most.
“Once again, it is clear that only with the full powers of independence, that we can stop spending a fixed budget on protecting households against Tory cuts and start to properly build a fairer, more equal Scotland.”
‘We face a very difficult financial position over the new few years’
Prioritising public spending is essential to grow a stronger economy as Scotland recovers from the pandemic and faces up to the cost of living crisis, Finance Secretary Kate Forbes has said.
Speaking ahead of the publication of the Resource Spending Review, Ms Forbes said more focused government and public sector funds would achieve ambitions to tackle child poverty, reach net zero and deliver sustainable services for the future.
The Spending Review will give broad parameters for spending for the next four years and set out a series of government reforms.
Finance Secretary Kate Forbes said: “These are challenging times, and we need to be canny with our spending, but I’m confident that if we work together we can get through this cost of living crisis and still achieve our ambitions.
“That means tackling child poverty, driving our economic recovery from COVID and achieving net zero, while building a stronger public sector that is sustainable for the future.
“We face a very difficult financial position over the next few years with funding increases below inflation levels and the challenge of recovering from the pandemic without the financial tools available to every other government in the world. That means while the spending review is not a budget, it will include difficult decisions, to ensure we can really focus on supporting households and services at this time.
“The Resource Spending Review will detail the funding available over the coming years to achieve these goals, and it will be published alongside the Medium-Term Financial Strategy (MTFS) which gives economic context to the challenges and opportunities which lie ahead.”
Ms Forbes will outline the Resource Spending Review to Parliament when it is published tomorrow (May 31).
The Scottish Government says it is doing ‘everything within its powers and fixed budgets to ensure people, communities and businesses are supported as far as possible’, including investing almost £770 million this year in cost of living support and doubling the Scottish Child Payment to £20 per week.
Earlier this year it increased eight Scottish benefits by 6%, the rate of inflation at the time, and introduced a range of benefits not available elsewhere in the UK.
Expanding free school meals and providing £150 council tax payments to low income families are included in further actions to put money back into people’s pockets at a time when they need it most.
It’s a popular line with this government. And it should be true – but sadly, it isn’t.
The majority of people in poverty (57 per cent, or 8.3 million people) live in a working household. That rises to 75 per cent of children in poverty.
The government’s record on this is atrocious. The number of people in in-work poverty has increased by 2 million since they came to power in 2010. It’s now at a record high, as is the number of children in poverty living in a house where at least one adult is in work.
If work is to be the best route out of poverty, the government must do more to get pay rising. In the meantime, it can’t use “work is the best route out of poverty” as a cop out for not properly addressing the cost of living crisis. We need proper action. Structural solutions – such as improved trade union rights, nationalisation of energy companies, and improvements to the benefits system – are needed alongside a windfall tax to fund urgent support to pay energy bills.
17-year pay squeeze
A key reason for the rise of in-work poverty is that work simply doesn’t pay enough. The government’s minimum wage, even the one it calls a living wage, isn’t a real living wage.
And we’re in the midst of a 17-year pay squeeze. Real pay is currently lower than it was in 2008, and the Office for Budget Responsibility forecasts that it won’t return to above 2008 levels until 2025. This 17-year pay squeeze is, by far, the longest in living memory.
The impact of this on workers’ pay packets has been massive. If real weekly wages had continued growing at the pre-2008 rate, they’d now be £111 per week higher than they are. By 2026, if forecasts are correct, this’ll be £164.
Impact of energy costs
It’s against this background that real pay is falling again. Inflation, at 9 per cent, is hitting wages hard. In March 2022, average weekly earnings fell by £16 per week (-2.7 per cent) compared to the same month a year ago. Public sector pay growth is the worst on record – falling by £30 per week (4.9 per cent) over the same period.
The news that the energy cap will rise by around £800 in October is incredibly worrying. If this does happen, it means that between December 2021 and December 2022, energy bills will have risen by a massive 119 per cent. In contrast, nominal wages will have risen by just 5.2 per cent. The standard benefits payment will have risen by just 3.1 per cent. This means that energy bills are set to grow 23 times faster than wages and 38 times faster than benefits this year.
Pushing work as the route out of poverty is also often the government’s way of refusing to improve the welfare system. decent work and social security must go hand in hand, not be seen as alternatives.
Since it came to power, the government has repeatedly cut benefits payments in real terms. The real value of the standard benefits payment has fallen by £51 per month since 2010.
As set out above, in the face of massive rises in energy bills, the government has made real term cuts to benefits payments. When the price cap rises again in October, energy bills will be £1,523 per year higher than they were a year before. The standard benefits payment will only be £121 per year higher.
A common proposal around benefits is to bring forward the increase in benefits and pensions that would be expected in April 2023/24 to autumn of this year. For example, if inflation hit 10 per cent in September of this year (September is the reference month for benefit uprating), rather than waiting to increase benefits in April, they could be increased in October, and then maintained at that level from April onwards.
But this would increase benefits by around £7.70 a week, meaning it wouldn’t even go close to making up for cutting the £20 uplift.
Like the standard benefits payments, pensions also went up by just 3.1 per cent in April this year. Government made an active decision not to maintain the triple-lock – which would have seen pensions rise by around 8 per cent in line with the wage figures last autumn. This will cost pensioners almost £500 across the year.
Good, well-paid work is a route out of poverty
The current government has a proclivity towards badly funded temporary schemes and half-baked novelty ideas, which has again become clear during the current crisis. If it’s serious about tackling the cost of living crisis, we needed proper solutions to support people right now, alongside structural changes to fix these problems in the long term.
It’s not enough to just say that work is a route out of poverty. The reality is that too much work is low-paid and insecure. If government wants work to be a route out of poverty, it needs to ensure all work is well-paid and secure.
When it comes to pay, government should stop attacking trade unions, and instead improve trade union rights. Trade unions need stronger powers and better access to workplaces to drive up wages and conditions.
Fair pay deals need to be implemented in whole industries, negotiated with unions, and designed to get pay and productivity rising in every sector. We also need an emergency boost to the national minimum wage, as well as the long-awaited introduction of that employment bill they’ve been promising for ages to tackle insecure work.
To help people with energy costs, the government must recognise that energy is an essential public good that should come under public ownership, and implement an accelerated programme to insulate homes. To help people right now, we need a windfall tax to pay for additional grants to help with the costs of energy. With the energy cap rising by £1,523 in the space of just a year, this support will need to be substantial.
Government must also fix the benefits system. We want much more generous benefits payment (with the standard payment raised to £260 per week), alongside the scrapping of the cruel aspects of the system, such as the five-week wait, the benefits cap, the two-child limit and no recourse to public funds.
Work isn’t currently a route out of poverty, but it can be if government takes steps to ensure that all work is good, well-paid work.
MORE SUPPORT NEEDED, SAYS SCOTTISH FINANCE SECRETARY
The most vulnerable households across Scotland will receive support of over £1,000 this year, including a new one-off £650 cost of living payment
Universal support increases to £400 across Great Britain, as the October discount on energy bills is doubled and the requirement to repay it over 5 years scrapped
This new £15 billion support package is targeted towards millions of low-income households and brings the total cost of living support to £37 billion.
New temporary Energy Profits Levy on oil and gas firms will raise around £5 billion over the next year to help with cost of living, with a new investment allowance to encourage firms to invest in oil and gas extraction in the UK.
Millions of households across the UK will benefit from a new £15 billion package of targeted UK government support to help with the rising cost of living, the Chancellor announced yesterday.
The significant intervention includes a new, one-off £650 payment to more than 8 million low-income households on Universal Credit, Tax Credits and legacy benefits to be made in two tranches starting in the summer, with separate one-off payments of £300 to pensioner households and £150 to individuals receiving disability benefits – groups who are most vulnerable to rising prices.
Rishi Sunak also announced that the energy bills discount due to come in from October is being doubled from £200 to £400, while the requirement to pay it back will be scrapped. This means the vast majority of households will receive a £400 discount on their energy bills from October.
The new Cost of Living Support package will mean that the most vulnerable households in Scotland will receive over £1,000 of extra support this year.
To ensure there is support for everyone who needs it, Mr Sunak also announced a £500 million increase for the Household Support Fund. This brings the total Household Support Fund to £1.5 billion.
To help pay for the extra support – which takes the total direct government cost of living support to £37 billion – Mr Sunak said a new temporary 25% Energy Profits Levy would be introduced for oil and gas companies, reflecting their extraordinary profits. At the same time, in order to increase the incentive to invest the new levy will include a generous new 80% investment allowance. This balanced approach allows the government to deliver support to families, while encouraging investment and growth.
The Chancellor of the Exchequer Rishi Sunak said: ““I know that people in Scotland are anxious about keeping up with rising energy bills, which is why today we have introduced measures which will take the support for millions of the lowest income households over £1,000.
“As a nation we have a responsibility to help the most vulnerable, which is why this support is mostly targeted at people on low incomes, pensioners and disabled people. But we understand that all households in Scotland will be concerned about the rise in energy costs this Autumn, so every household is set to get £400 off their energy bills from October, with no repayments necessary.
“It is right that companies making extraordinary windfall profits from rising energy prices should contribute, and I’m introducing a temporary energy profits levy to help pay for this support, while still encouraging the investment that generates jobs in Scotland.”
Scottish Secretary Alister Jack said: “Global issues are causing real pressures in the cost of living for UK families. We understand how tough it is at the moment for many households, which is why the Chancellor has today announced a further £15 billion support package.
“A total of £400 per household towards fuel bills will help protect families from rising energy costs. Cash payments of £650 for low-income households on means tested benefits will target support at the most vulnerable in our society at this difficult time. This comes on top of our existing £22bn support package.
“Some of these measures will be paid for by a temporary levy on oil and gas companies – one which incentivises investment in the UK’s energy security.”
There is now more certainty that households will need further support, with inflation having risen faster than forecast and Ofgem expecting a further rise in the energy price cap in October.
So as part of the UK government’s targeted support, the Chancellor announced that around eight million of the lowest income households on Universal Credit, Tax Credits, and legacy benefits will receive an automatic £650 cost of living payment in two instalments via the welfare system this year.
Yesterday’s announcement is on top of the government’s existing £22 billion cost of living support which includes February’s energy bills intervention and action taken at this year’s Spring Statement including a £330 tax cut for millions of workers through the NICs threshold increase in July and 5p cut to fuel duty.
Energy Profits Levy
Surging commodity prices, driven in part by Russia’s war on Ukraine, has meant that the oil and gas sector have been making extraordinary profits. Ministers have been clear that they want to see the sector reinvest these profits in oil and gas extraction in the UK.
In order both to fairly tax the extraordinary profits and encourage investment, the Chancellor announced a temporary new Energy Profits Levy with a generous investment allowance built in. This nearly doubles the tax relief available and means the more investment a firm makes, the less tax it will pay.
The new Levy will be charged on oil and gas company profits at a rate of 25% and is expected to raise around £5 billion in its first 12 months, which will go towards easing the burden on families. It will be temporary, and if oil and gas prices return to historically more normal levels, will be phased out.
The new Investment Allowance, similar in style to the super-deduction, incentivises companies to invest through saving them 91p for every £1 they invest. This nearly doubles the tax relief available and means the more a company invests, the less tax they will pay.
The government expects the combination of the Levy and the new investment allowance to lead to an overall increase in investment, and the OBR will take account of this policy in their next forecast.
The Levy does not apply to the electricity generation sector – where extraordinary profits are also being made due to the impact that rising gas prices have on the price paid for electricity in the UK market, which has also been making extraordinary profits partly due to record gas prices but also due to how the market works.
As set out in the Energy Security Strategy the government is consulting with the power generation sector and investors to drive forward energy market reforms and ensure that the price paid for electricity is more reflective of the costs of production.
The Chancellor announced yesterday that the Treasury will urgently evaluate the scale of these extraordinary profits and the appropriate steps to take.
During the announcement, the Chancellor also set out the government’s strategy to control inflation through independent monetary policy, fiscal responsibility, and supply side activism – a plan he said that should see inflation come down and returning to its target over time.
Finance Secretary Kate Forbes has welcomed the short term action announced by the Chancellor of the Exchequer, but warned more support is needed for households and businesses as the cost of living crisis worsens.
Following calls from the Scottish Government, the UK Government has taken steps to ensure that cash grants, rather than loans, are provided to those on lowest incomes. Ms Forbes has also cautiously welcomed the decision to introduce a Windfall Tax on energy companies benefiting from significant profits but commented that it means Scottish industry is disproportionately funding interventions across the UK.
Responding to the Chancellor’s statement, Ms Forbes has said UK Ministers should have acted earlier and gone further to provide more support that would make a real long term impact, including following the Scottish Government’s lead by doubling the Scottish Child Payment to £20 per week – which is due to increase to £25 from late 2022 helping lift an estimated 50,000 children out of poverty in 2023-24.
Ms Forbes said: “Many households will be relieved to see the support belatedly announced today, but we still need a long term solution to the cost of living crisis and reassurance that the UK Government is going to tackle long term inequalities rather than provide one-off bursts of crisis support.
“Rather than listen to our plea for a comprehensive funding package that fully addresses the unprecedented rise in the cost of living and uses the full £30 billion of fiscal headroom, this piecemeal approach makes it highly likely that more support will be needed later when energy prices rise significantly in the autumn.
“There is also a severe lack of support for businesses – many of them are still struggling to recover from the pandemic and now face crippling increases in energy costs and the damaging impacts of Brexit on supply chains and the labour market. Without urgent economic support there is a real risk that the UK economy is heading for a recession.
“Inflation is at its highest levels in 40 years and the UK Government’s failure to fully invest in increasing incomes, tackling inequality and boosting economic competitiveness will only risk pushing households into further debt and poverty
“The UK Government has almost £30 billion of fiscal headroom, spending only half of this during a cost of living crisis does not go far enough, especially when a further £5 billion from the Windfall Tax will be raised.
“The introduction of a windfall tax is a start, but as a stand-alone measure this means Scottish industry is carrying the weight of UK-wide interventions.
“The removal of the £20 Universal Credit uplift last year was a hammer blow to hard pressed families and the Chancellor’s failure to restore it and increase it to £25 only places a disproportionate burden on the shoulders of those who need help most. The statement was also worryingly silent on public-sector pay with no related consequential funding, when the lowest paid need urgent assurance in the face of rising inflation.
“The refusal to reverse the National Insurance increase implemented in April and temporarily suspend VAT on household energy bills will also cost families hundreds of pounds annually at a time when their budgets have never been more squeezed.
“The Scottish Government has already taken action to support people, communities and businesses as much as possible, with almost £770 million per year invested in cost of living support. We have increased eight Scottish benefits by 6%, closer to the rate of inflation, and introduced a range of family benefits not available elsewhere in the UK.”
Commenting on the government’s cost of living support package announced today (Thursday), TUC General Secretary Frances O’Grady said: “Unions have repeatedly called for an Emergency Budget to help families, and a windfall tax on energy companies.
“The Chancellor should have acted far sooner after his inadequate Spring Statement. His dither and delay has caused unnecessary hardship and worry for millions.
“While today’s intervention is badly needed, we should have never been here in the first place.
“Years of attacks on wages and universal credit have left many households on the brink.
“The government still doesn’t have a plan for giving families long-term financial security.
“With energy bills rising 23 times faster than wages we urgently need to get pay packets rising and to pay universal credit at a permanently higher rate – not just a one-off boost.
“That’s the best way to protect livelihoods and to support the economy.”
Madam Deputy Speaker, The high inflation we are experiencing now is causing acute distress for the people of this country. I know they are worried, I know people are struggling. I want to explain what is happening, why it is happening, and what we propose to do about it.
I trust the British people, and I know they understand no government can solve every problem, particularly the complex and global challenge of inflation.
But this government will never stop trying to help people, to fix problems where we can, to do what is right – as we did throughout the pandemic.
We need to make sure that for those whom the struggle is too hard…and for whom the risks are too great…they are supported.
This government will not sit idly by whilst there is a risk that some in our country might be set so far back… they might never recover.
This is simply unacceptable. I will never allow that happen.
And I want to reassure everybody – we will get through this.
We have the tools and the determination we need to combat and reduce inflation.
We will make sure the most vulnerable and the least well off get the support they need at this time of difficulty.
And we will turn this moment of difficulty into a springboard for economic renewal and growth.
With more jobs, higher skills, greater investment – our plan for a stronger economy.
Madam Deputy Speaker, Before I turn to the details of our plan, let me put into context for the House, the challenge we face.
This country is now experiencing the highest rate of inflation we have seen for forty years.
The Bank of England expect inflation to average around 9% this year.
Our exposure to global shocks continues to explain most of the inflation above the 2% target.
Supply chain disruption as the world reopened from Covid…
…combined with Russia’s invasion of Ukraine…
…and potentially exacerbated by recent lockdowns in China…
…are all contributing to significant price increases for goods and energy.
However, over the course of this year, the situation has evolved and has become more serious.
There are areas of particular concern.
Even excluding energy and food, core inflation has become broader based and elevated.
Of the basket of goods and services we use to measure inflation, a record proportion are seeing above average price increases.
Also, we are acutely exposed to the European energy price shock and, like the US, we have a tight labour market.
Make no mistake – the lowest unemployment in almost 50 years, just months after averting a jobs crisis during the pandemic, is good news.
But combined with the shock to European energy prices, it does contribute to the UK’s relatively high rate of inflation.
And lastly, as the Bank have noted, longer-term inflation expectations have risen above their historical averages, by more than they are in the US and Europe.
We cannot and must not allow short term inflationary pressures to lead people to expect that high inflation will continue over the long term.
Because Madam Deputy Speaker
We can get inflation under control.
It is not some abstract force outside our grasp.
It may take time, but we have the tools we need and the resolve it will take to reduce inflation.
Madam Deputy Speaker,
We have three specific tools available to combat and reduce inflation – and we are using them all.
Independent monetary policy. Fiscal responsibility. And supply side activism.
First, our primary tool is a strong, independent monetary policy.
Since control of monetary policy was taken out of the hands of politicians 25 years ago, inflation has averaged precisely 2%.
It is right the Bank of England are independent.
And I know the Governor and his team will take decisive action to get inflation back on target and ensure inflation expectations remain firmly anchored.
Second, we need responsible fiscal policy.
That means providing fiscal support where required but not making the situation unnecessarily worse…causing inflation, interest, and mortgage rates to go up further than they otherwise would.
Excessively adding fiscal stimulus into a supply constrained economy…
…especially one in which households and businesses have built up over £300 billion of excess savings…
…risks being counterproductive and increasing inflationary pressures.
In other words, fiscal support should be timely, targeted, and temporary.
Timely, because we need to help people when the shock is at its worst.
Targeted, because unconstrained stimulus will make the problem worse.
And temporary, because if we do not meet our fiscal rules, and ensure the public finances are resilient in the longer run…
…we create even greater risks on inflation, interest rates, and the trend rate of economic growth.
And third, we are taking an activist approach to supply side reforms.
This will increase our productive capacity, ease inflationary pressures, and raise our long-term growth potential.
The PM’s energy security strategy will, over time, reduce bills by increasing energy supply and improving energy efficiency.
The W&P Secretary is moving half a million jobseekers off welfare and into work…
…and doing more to support older people back into the jobs market.
The Home Secretary is making our visa regime for high-skilled migrants one of the most competitive in the world.
And, in the autumn, we will bring forward tax cuts and reforms to encourage businesses to invest more, train more, and innovate more – the path to higher growth.
So, independent monetary policy.
Fiscal responsibility.
Supply side reform.
The country should have confidence, that using these three tools…
…we will combat inflation – and reduce it over time.
But of course, we know that households are being hit hard, right now.
So today, Madam Deputy Speaker, we will provide significant support to the British people.
But as I have said, a critical part of how we are dealing with inflation is responsible fiscal policy.
What this means in practical terms is that as we support people more, we need to think about the fairest way to fund as much of that cost as possible.
The oil and gas sector is making extraordinary profits.
Not as the result of recent changes to risk taking or innovation or efficiency.
But as the result of surging global commodity prices – driven in part by Russia’s war.
And for that reason, I am sympathetic to the argument to tax those profits fairly.
But as ever, there is a sensible middle ground.
We should not be ideological about this…we should be pragmatic.
It is possible to both tax extraordinary profits fairly…and incentivise investment.
And so, like previous governments, including Conservative ones – we will introduce a temporary, targeted, Energy Profits Levy.
But, we have built into the new Levy a new Investment Allowance, similar to the super-deduction…
…that means companies will have a new and significant incentive to reinvest their profits.
The new Levy will be charged on profits of oil and gas companies at a rate of 25%.
It will be temporary, and when oil and gas prices return to historically more normal levels, the Levy will be phased out – and with a sunset clause written into the legislation.
And, crucially, with our new investment allowance, we are nearly doubling the overall investment relief for oil and gas companies.
This means that, for every £1 a company invests, they’ll get back 90 per cent in tax relief.
So the more a company invests, the less tax they will pay.
And we understand that certain parts of the electricity generation sector are also making extraordinary profits.
The reason for this is the way our market works.
The price electricity generators are paid is linked not to the costs they incur in providing that electricity…but rather to the price of natural gas – which is extraordinarily high right now.
Other countries like France, Italy, Spain and Greece have already taken measures to correct this.
As set out in the Energy Security Strategy, we are consulting with the power generation sector and investors…
…to drive forward energy market reforms and ensure that the price paid for electricity is more reflective of the costs of production.
Those reforms will take time to implement.
So, in the meantime, we are urgently evaluating the scale of these extraordinary profits…and the appropriate steps to take.
So, Madam Deputy Speaker,
Our Energy Profits Levy will encourage investment, not deter it.
It raises around £5bn revenue over the next year so that we can help families with the cost of living.
And it avoids having to increase our debt burden further.
Because there is nothing noble in burdening future generations with ever more debt to pay…
…because politicians of the day were too weak to make the tough decisions.
Madam Deputy Speaker,
I know the whole House will agree we have a responsibility to help those who…
…through no fault of their own…
…are paying the highest price for the inflation we face.
To help with the cost of living, we are going to provide significant, targeted support to millions of the most vulnerable people in our society:
Those on the lowest incomes, pensioners, and disabled people.
First, people on the lowest incomes.
Over eight million households already have incomes low enough for the state to be supporting their cost of living through the welfare system.
They could be temporarily unemployed and looking for work.
Unable to work because of long-term sickness or disability.
Or on low pay and using benefits to top up their wages.
Right now, they face incredibly difficult choices.
So, I can announce today we will send, directly to around eight million of the lowest income households, a one-off Cost of Living Payment of £650.
Support worth over £5bn to give vulnerable people certainty that we are standing by them at this challenging time.
DWP will make the payment in two lump sums – the first from July, the second in autumn, with payments from HMRC for those on Tax Credits, following shortly after.
There is no need for people to fill out complicated forms or bureaucracy – we will send the payment straight into their bank accounts.
Our policy will benefit over eight million households in receipt of means-tested benefits, from July.
Uprating, in that time frame, could only be done for those on Universal Credit.
And our policy will provide a larger average payment this year of £650.
Whereas uprating the same benefits by 9% would only be worth, on average, £530.
There are two further groups who will need targeted extra support.
Many pensioners are disproportionately impacted by higher energy costs.
They can’t always increase their incomes through work.
And, because they spend more time at home, and are more vulnerable, they often need to keep the heating on for longer.
And we estimate many people who are eligible for Pension Credit are not currently claiming it…
…which means there will be many vulnerable pensioners not receiving means-tested benefits.
So, I can announce today that, from the autumn, we will send over eight million pensioner households who receive the Winter Fuel Payment – an extra, one-off Pensioner Cost of Living Payment of £300.
Disabled people also face extra costs in their day-to-day lives – like having energy-intensive equipment around the home or workplace.
So, to help the 6 million people who receive non-means tested disability benefits, we will send them, from September…
…an extra, one-off Disability Cost of Living Payment, worth £150.
Many disabled people will also receive the payment of £650 I have already announced, taking their total cost of living payments to £800.
And I can reassure the House that next year, subject to the Secretary of State’s review, benefits will be uprated by this September’s CPI…
…which, on current forecasts, is likely to be significantly higher than the forecast inflation rate for next year.
Similarly, the triple lock will apply for the state pension.
Of course, we recognise the risk that, as with any policy, there may be small numbers of people who fall between the cracks.
For example, it is not possible right now for DWP or HMRC to identify people on Housing Benefit who are not also claiming other benefits.
So, to support them and others, we will extend the Household Support Fund, delivered by Local Authorities, by £500m from October.
This is a significant set of interventions to support the most vulnerable in our country.
We will legislate to deliver this support on the same terms in every part of the United Kingdom – including Northern Ireland.
And, taken together, our direct cash payments, will help one third of all UK households with the cost of living, support worth over £9bn.
So, Madam Deputy Speaker,
We are meeting our responsibility to provide the most help to those on the lowest incomes.
I believe that is fair and I’m confident the House would agree.
But there are many other families who do not require state support in normal times.
They are also facing challenging times.
Is it fair to leave them unsupported?
The answer must surely be no.
While it is impossible for any government to solve every problem, we can and will ease the burden as we help the entire country through the worst of this crisis.
So, we will provide more support with the rising cost of energy – and that support will be universal.
Earlier this year, we announced £9bn to help with the cost of energy.
Including a Council Tax rebate of £150 for tens of millions of households.
And we plan to provide all households with £200 off their energy bills from October, with the cost of that repaid over the following five years.
Since then, the outlook for energy prices has changed.
I’ve heard people’s concerns about the impact of these repayments on future bills.
So I have decided that those repayments will be cancelled.
So, for the avoidance of doubt, this support is unambiguously a grant.
And furthermore, I have decided that the £200 of support for household energy bills will be doubled to £400 for everyone.
We’re on the side of hard-working families, with £6bn of financial support.
So, Madam Deputy Speaker,
To summarise:
Our strategy is to combat and reduce inflation over time through independent monetary policy, fiscal responsibility, and supply side activism.
We are raising emergency funds to help millions of the most vulnerable families who are struggling right now.
And all households will benefit from universal support for energy bills of £400 – with not a penny to repay.
In total, the measures I’ve announced today provide support worth £15bn.
Combined with the plans we’ve already announced…that means we are supporting families with the cost of living to the tune of £37bn or 1.5% of GDP.
That’s higher or similar to countries like France, Germany, and Italy.
And I’m proud to say that around three quarters of the total support will go to vulnerable households.
As a result of the measures we’ve announced today, and the action we’ve already taken this year:
The vast majority of households will receive £550.
Pensioners will receive £850.
And almost all of the eight million most vulnerable households in the country will, in total, receive support of at least £1,200.
Let me put this into context.
The House will have noted the news from Ofgem earlier this week.
They currently expect the energy price cap to rise in October to £2,800.
That’s an average increase in people’s bills this year of just under £1,200.
The same amount our policies will provide for the most vulnerable this year.
I know there are other pressures.
I am not trying to claim we have solved the entire problem for everyone.
No government could.
But I hope that when people hear the significant steps we are taking…
…the millions we are helping…
…they will feel some of the burden eased, some of the pressures lifted.
And they will know, this Government is standing by them.
And Madam Deputy Speaker in conclusion,
Supporting people with the cost of living is only one part of our plan for a stronger economy…
…A plan that is creating more jobs…
…Cutting taxes for working people…
…Reducing our borrowing and debt…
…Driving businesses to invest and innovate more…
…unleashing a skills revolution…
…Seizing the benefits of Brexit…
…And levelling up growth in all parts of the United Kingdom.
The British people can trust this government because we have a plan for a stronger economy and I commend this Statement to the House.
