Fire and rehire

Spring Statement expectations. The Institute for Government previews the Chancellor’s Spring Statement, highlighting six things to look out for. Rishi Sunak is widely expected to cut fuel duty by at least 5p and raise the threshold at which low income earners begin to pay National Insurance Contributions in tomorrow’s Spring Statement.

• The case for intervention. The Joseph Rowntree Foundation’s Katie Schmuecker calculates that, once housing costs are paid, and even after the help already announced by the Chancellor, £1 in every £5 of low income household budgets will be spent on energy bills this year. The Times’ Mehreen Khan estimates suggested that the Chancellor has an extra £40bn in ‘fiscal space’ to spend on policy options to support households through the ongoing cost of living crisis. (The Resolution Foundation’s James Smith analyses the latest public finances in a helpful Twitter thread.) Money Saving Expert Martin Lewis outlined the case for intervening on BBC’s Sunday Morning show.
• Uprating benefits. JRF and other groups focusing on poverty argue that the simplest and most effective method of providing help to low income households would be for benefits and pensions to be updated by the current rate of inflation (around 7-8%) rather than the scheduled 3.1%, which was the rate last October. Without uprating benefits, the Child Poverty Action Group calculates that 100,000 families will lose £1,600 a year from their entitlement (£1,840 for families in London). The Guardian’s Larry Elliot explains why uprating by the current rate of inflation would best protect the most vulnerable, as well as boosting the economy increasingly at risk of recession. Labour supports such an uprating; Shadow Chancellor Rachel Reeves noted that the Treasury will pick up a tax windfall due to rising prices, which can be used to pay for it. The Resolution Foundation’s Adam Corlett and Torsten Bell calculate that increasing all benefits by an extra 5% would cost a one-off £9 billion in 2022-23, or £3 billion if only Universal Credit and Tax Credits are included. 
• NICs thresholds. Although some Conservative MPs have called on the Chancellor to scrap the planned rise in National Insurance, it is generally regarded as more likely that he will raise NICs thresholds in line with updated inflation forecasts, which could take an extra 150,000 of the lowest earners out of the tax. The Resolution Foundation calculates that raising the NIC threshold to £11,300 to offset the NI rate rise for low income workers would cost around £5bn, and raising it to £12,500 would cost around £9bn.
• Distributional impacts. The Resolution Foundation analyses the distributional impacts of three options: scrapping the NI rate rise, raising NI thresholds, and benefit uprating by current inflation. Former Treasury Adviser Tim Pitt gives a good summary of the politics surrounding each decision.
• Fuel duty cut. Analysing a possible cut in fuel of 5p per litre, NEF’s Alex Chapman concludes that it would be inefficiently targeted, regressive and inadequate in scale. It would cost around £2.5bn a year.‍
• Other proposals. The Scottish Poverty and Inequality Commission’s co-chair Morag Treanor noted that the eligibility threshold for free school meals has barely been uprated to keep pace with inflation in 20 years. Highlighting that women are disproportionately impacted by the cost of living crisis, the Women’s Budget Group has called for a variety of reforms to social security, tax increases for high income households and businesses, investment in public services and housing, and more. The Alliance for Full Employment has called for a package of measures including stopping the rise in NICs, reversing the £20 per week uplift to UC, providing greater targeted help for energy costs, and implementing a ‘comprehensive programme’ of housing insulation. The former Archbishop of Canterbury and more than 250 religious leaders wrote to the PM and Chancellor calling for a windfall tax on fossil fuel companies, increased investment in renewables and energy efficiency.

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‍Inflation, profits and wages. Christine Berry looks at the political economy of inflation and the decisions of businesses to pass on the increasing cost of production to consumers through higher prices, and workers through lower wages, rather than passing them on to business owners by reducing profits.

Interest rates. Last week, the Bank of England raised the base rate of interest from 0.5% to 0.75% in a bid to curb inflation. The central bank’s Monetary Policy Committee (MPC) voted 8-1 for the rise, making it the first time in over twenty years that the Bank has raised rates at three successive meetings.

• Divided opinion. The TUC said that the bank had made the ‘wrong call’: its Head of Economics Kate Bell said that the rise was the ‘last thing hard-pressed families need’. Meanwhile, the Institute for Economic Affairs said that the Bank of England could have gone further, and that the rise was ‘too little too late’. 
• Fiscal policy. The IPPR’s Carsten Jung said that the rise must be met with bold fiscal policy from the Chancellor to ‘deliver a package to secure people's real incomes’ as the cost of living crisis deepens. 

Energy security strategy. BusinessGreen’s Cecilia Keating reports that the government’s awaited energy security strategy has been delayed due to a ‘growing rift’ between Boris Johnson and Rishi Sunak over the role of clean energy in the government’s response to soaring energy bills. However, both have expressed support for renewables in clean energy recently, with the PM arguing that the UK must ‘double down’ on renewables in the Telegraph and the Chancellor writing a ‘Strategic steer to the UK Infrastructure Bank’ stressing the need to increase investment in low carbon energy and energy efficiency. (Read E3G’s response explaining how the UK Infrastructure Bank can finance green homes.)

• Nuclear power and fossil fuels. The FT reports that the government is looking to extend the life of the nuclear plant Sizewell B in Suffolk and seeking ‘to improve security of supply of hydrocarbons by increasing North Sea oil and gas production and potentially keeping some of Britain’s few remaining coal-fired power plants open slightly longer than expected.’
• No energy security without energy efficiency.  A cross-party group of parliamentarians wrote a letter to The Times explaining the importance of energy efficiency in reducing demand for gas. E3G has shown that the UK can divest from Russian gas imports and save £150 a year on household energy bills with ‘demand side’ policy to increase energy efficiency. They also argue that by 2025, energy efficiency, clean heat and renewables could replace four times the gas the UK imports from Russia. This would be much faster than the time it takes to develop a new oil and gas field and would lower energy bills for the long term, which more gas production cannot do. E3G’s Colm Britchfield and Pedro Guertler outline nine things that should be included in the government’s strategy.

‍Monopoly power in the energy sector. Common Wealth’s new report on electricity and gas distribution networks argues that a ‘fragmented system of private monopolies that delivers outsized returns for investors’ are partly to blame for rising energy bills. Common Wealth proposes a windfall tax on the UK’s 10 big electricity and gas distribution companies, which have complex ownership structures, with some based in offshore holding companies and tax havens. It argues that ‘in the long run these monopolies should be in public ownership’.

Climate finance. Jubilee Debt Campaign’s Tess Woolfenden analysed the latest IPCC report’s analysis of debt and climate finance. She concluded that ‘IPCC scientists recognise the harm of private lending deepening the debt trap facing climate vulnerable countries’ but that ‘the report returns to the orthodoxy that private sector debt issuance could provide finance to address the climate crisis. The same companies that have to a large degree caused the climate crisis are encouraged to continue profiting from it by lending at interest to the countries that are suffering the effects.’

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Manifesto for a Green, Just and Democratic European Economy. Over 270 prominent academics, unions and civil society organisations issued a letter calling for reform ofing the EU’s fiscal rules to enable public investment necessary for transforming economies to hold global heating below 1.5°C.

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Carbon tax and dividend scheme. Autonomy has released a report on the effects of a global carbon tax and dividend scheme. It calculates that this could effectively end extreme poverty globally, lifting more than a billion people above the poverty line of $3.20 a day. In the UK the scheme would benefit 70% of the population who would receive dividends from the scheme from the top 30% of the population, with the majority of contributions coming from the top 1%. (Read Autonomy’s Twitter thread summary and coverage in the Independent.)

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Windfall tax on North Sea oil and gas firms. The FT’s Chris Giles came out in support of a windfall tax on North Sea oil and gas companies, arguing that the Chancellor should go further than Labour’s proposal of a 10% tax increase. (See also NEB Managing Editor Michael Jacobs’s analysis in the Guardian last month.)

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Sanctions and taxes on Russian assets. Economist Thomas Piketty argued in the Guardian that ‘the western elite is preventing us from going after the assets of Russia’s hyper-rich’. Piketty calls for the establishment of an international financial register and for western states to levy a heavy tax on these assets. 

• Tracking ownership. The government has recently approved the Beneficial Ownership Data Standard which will help identify legal entities whose ownership structures may create risks to national security. However, in response to slow progress, the Guardian and the Organized Crime and Corruption Reporting Project have launched the Russian Asset Tracker to improve transparency in the ownership of wealth otherwise obscured by shell companies and tax havens. 

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