March 22, 2022
This report from UK think tank the Adam Smith Institute looks at how the Government can go for growth and cut the cost of living.
Britain has been plunged into a cost of living crisis. Inflation, energy prices, stagnant wages and an increasingly heavy tax burden have all combined to put huge pressure on household budgets—especially those on low incomes. There are a number of policy measures that the Government could take in the short, medium and long-term to alleviate the worst of these pressures, including: A one off payment to those hit hardest The Government should consider proposals for one-off cash payments to millions of households, rather than pursue more complicated rebate methods to provide immediate relief to the cost of living crisis. End the moratorium on fracking Buying British businesses extra time to reach Net Zero by supplying this cleaner, cheaper, and more efficient form of energy, the Government can continue to champion domestic decarbonisation whilst permitting strong economic growth and lower inflation. Cancel the 1.25 percentage point National Insurance Contribution hike Setting a precedent for increasing the tax burden while real wages remain relatively stagnant would keep British taxpayers trapped in a low wage, high tax economy. Using the NIC hike to provide some short term relief in the current, acute situation risks keeping the country vulnerable to future spikes in the cost of living, given it means less money for saving and investment for the taxpayer. Short of cancelling the hike, the Chancellor should at minimum raise the threshold for paying employee NI. Eliminate fiscal drag by unfreezing tax thresholds Income tax thresholds should be indexed by inflation. In the immediate term, the Government should at least unfreeze the first income tax threshold, taking those on minimum wage out of income tax entirely, to help ease the cost of living. Reform student loans Removing the student loan write off period of 30 years, to allow rest-of-life liability for the loan, the fiscal burden is shifted onto the very individuals who undertook and directly benefited from their education. To allow a fair-deal for the taxpayer, the loans should be RPI-adjusted. However, the additional interest rate, in place to cushion the ballooning write-off costs of the loans, should be limited to a revised, lower figure to pay down the accumulated debt. Deregulate child:staff ratios to improve care and reduce cost Relaxing child:staff ratios could more than halve costs, reducing the cost of living for single parent households in particular and affording them more opportunity to work.Read Full Report