The Observer’s opinion on Rishi Sunak’s Cost of Living Package | Observer’s opening

Economists and anti-poverty activists have been warning for months that low-income families and the disabled will be left in dire financial straits as a result of inflation that has reached its highest level in 40 years. But for months, a government mired in scandal has chosen to ignore their plight, implement cuts to universal credit and put in place packages of financial support that goes mostly to well-to-do families. Labor calls for an unexpected tax on energy companies to fund more financial relief have gone unheeded.

Finally, the counselor gave and corrected the course. Last week, Rishi Sunak announced an additional one-time £15 billion financial support for families, funded in part through a £5 billion windfall tax on energy companies. It’s too late, causing needless suffering and stress to low-income families, but it’s a more generous package than anything that came before it and better, albeit imperfectly, aimed at people who need support most.

All energy bill payers will now receive a £400 grant instead of the £200 reimbursable credit originally announced by the Chancellor. In addition, £650 will be a one-time payment to all 8 million households receiving funds-tested benefits, with £150 and £300 available for individuals with disabilities and retirees.

Analysis by Resolutions highlighted that six out of every 10 pounds of the two previous cost-of-living support packages the counselor gave went to households in the upper half of the income distribution. This new set of measures helps correct this: two-thirds of the £15bn goes to households in the bottom half of the distribution. Given the intolerable choices some low-income parents are now facing — food banks have warned some children of food poisoning as a result of parents shutting down refrigerators to try to save energy bills and going to school in dirty clothes — this package should have been more inclined towards those who For them, inflation is the most severe crisis in existence.

However, there are some issues with the way these measures are implemented. By resisting offering this range of support for so long, the Chancellor has not only tasked some families with hardship and uncertainty for longer than needed, but has also missed the opportunity to provide it by increasing benefits more generously (benefits will be reduced by about 5 years) % in real terms this year as a result of not keeping pace with inflation). Using flat rate payments to compensate for this reduction in benefits is a blunt tool that has the disadvantage of penalizing lower-income families with children, who have higher costs.

This also undermines the principle held during the working years that in an economy with very high housing costs, and many low-paying jobs that do not pay enough to support the family, it is right for the government to subsidize low-paid parents financially. A large number of families, especially with children who live in areas of the country with expensive housing, will miss the flat rate payments entirely because it will take them above the benefits ceiling, which has not been increased in line with inflation.

The other fundamental problem with these measures is that it is just a one-time payment to compensate less affluent families for the higher cost of living this year, despite the above point. Many families were already in very difficult financial circumstances before this year as a result of the cumulative cuts to tax credits and benefits introduced by successive Conservative chancellors since 2010, even as they made expensive tax cuts that disproportionately benefited the wealthiest families. Families with children have borne the brunt of these cuts, with some thousands of pounds a year doing worse in 2020 than the support they were eligible for in 2010. And a one-time payment doesn’t even begin to address this structural erosion. The financial safety net for low-wage parents, which has contributed to lower standards of living in the long run, leading to more and more parents relying on food banks to feed their children in one of the world’s richest countries.

Besides this immediate crisis, the country also needs an economic growth strategy that reduces regional inequalities that will be made worse by Brexit and addresses the productivity crisis in the UK, which is putting pressure on real wages, as well as a public investment program in housing construction in order to reduce Housing costs for tenants. But this is a government battered from scandal to scandal, headed by a prime minister who clings to office despite being fined by police for breaking the law during a national social media emergency. Last week, Boris Johnson rewrote the ministerial law to ease his penalties, and in doing so, he codified the disintegration of integrity and probity he presided over.

The emergency support package is better than many expected given the chancellor’s speech in recent weeks. But this is not a government that is capable or inclined to address the structural causes of the unacceptable levels of child poverty that harm our nation.