Yahoo Finance Sunak told raising benefits could do more to support households than scrapping NI rise
Rishi Sunak should raise benefits and pensions as that would provide four times more support to poorer households than cancelling the national insurance increase, according to a thinktank.
The Resolution Foundation said uprating benefits by a further five percentage points, by 8.1% rather than the 3.1% currently planned, to keep up with inflation would deliver “four times more support to the bottom half of the income distribution per pound spent, than scrapping the rise in national insurance contributions (NICs).”
The report by the living standards thinktank said scrapping the 1.25 percentage point rise in national insurance contributions for employees and employers would see half the gains go to the richest fifth of households.
"Only £1 in every £6 would go to the bottom half of the distribution, who would on average only gain just £150, compared to £530 from the increase in benefits,” the analysis showed.
In contrast, the 8.1% rise in pensions and benefits would cost the government £9bn but would see three-quarters of the help go to people in the lower half of incomes.
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Raising the NICs threshold would deliver “the biggest cash gains to households in the middle part of the income distribution”, but still see twice as much support go to the top as the bottom half of the income distribution, who would gain £250 on average, Resolution Foundation said.
Adam Corlett, principal economist at the Resolution Foundation, warned that “rapidly rising inflation is on course to bring about the biggest income squeeze families across the UK have faced since the 1970s”.
He added: “While fuel duty cuts to relieve pressure at the petrol pump will inevitably be part of the package announced this week, the main income support will need to come from either the tax or benefits system.
“Low-to-middle income households will be hardest hit by the cost of living squeeze, especially when the energy price cap rises and should therefore be the priority for support.
“Raising benefits by a further five percentage points would deliver four times as much for these families as cancelling the national insurance rise, and should be the chancellor’s top policy priority.
“But if Rishi Sunak is keen to demonstrate his tax-cutting credentials alongside raising benefits, then raising the national insurance threshold too would be the best route, as it is well targeted at middle income households.”
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This comes as StepChange is calling on the chancellor to increase welfare benefits and offer more help with energy bills.
“A second cut to benefits in six months is unthinkable. The government should increase benefits by at least 7% in April to match inflation, and ensure support for housing costs increases in line with rents.
“All those struggling, including families affected by the benefit cap, must feel the impact,” the debt charity said in a joint statement with the Child Poverty Action Group.
StepChange is also calling for an expansion of the Warm Home Discount and wants energy companies to stop trying to recover debt from people who cannot afford to pay their bills.
Sunak is reportedly gearing up to slash fuel duty in his spring statement as prime minister Boris Johnson pursues long-term measures to guard against future energy bill pressures.
Sunak appeared on Sunday to hint at help for motorists in his so-called 'mini-budget', with measures to prevent filling up cars from being "prohibitively expensive" expected to be unveiled on Wednesday.
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There are suggestions the chancellor could temporarily cut fuel duty by as much as 5p per litre to support families and businesses through the cost of living crisis
Sunak told the BBC on Sunday that he cannot "fully protect" people from the consequences of rising prices.
Forecourt prices have risen sharply since Russia's invasion of Ukraine, with average prices at a record 165.9p per litre for petrol and 177.3p per litre for diesel.
