IEA economist responds to calls for a one-off ‘cost of living bonus’
21 January 2022
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In the Media
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Energy and Environment
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Economic Theory
Commenting on the proposed one-off payment of up to £500 for families to deal with high energy bills, Professor Len Shackleton, editorial and research fellow at free market think tank the Institute of Economic Affairs, said:
“We are still facing a high level of government borrowing, which is one of the factors behind rising inflation. To increase borrowing to give people a one-off payment is a short-term fix. It does nothing to reverse long-term problems such as ill-designed green levies and virtue-signalling restrictions on fracking and oil and gas extraction.“The proposal is copied from the USA’s Covid cheque. The US tax and welfare systems are very different from ours. This type of bright idea dissolves when faced with the complexities of UK taxes and benefits, and would be difficult to deliver quickly. It would create all sorts of anomalies as people move constantly on and off benefits and as pay changes shift people between tax bands.“If the need for some emergency support is required, it is certainly sensible to give people general spending power rather than, say, vouchers to cover energy bills. But this might more simply be achieved by a temporary increase in universal credit and delaying the introduction of higher national insurance rates. “Whatever relief is chosen, the government should be very careful not to be over-generous with public money and should seek spending savings elsewhere to compensate. And it should radically reconsider its energy policy.”
ENDS
Notes to editors
Contact: Emily Carver, Head of Media, 07715 942 731
IEA spokespeople are available for interview and further comment.
“We are still facing a high level of government borrowing, which is one of the factors behind rising inflation. To increase borrowing to give people a one-off payment is a short-term fix. It does nothing to reverse long-term problems such as ill-designed green levies and virtue-signalling restrictions on fracking and oil and gas extraction.“The proposal is copied from the USA’s Covid cheque. The US tax and welfare systems are very different from ours. This type of bright idea dissolves when faced with the complexities of UK taxes and benefits, and would be difficult to deliver quickly. It would create all sorts of anomalies as people move constantly on and off benefits and as pay changes shift people between tax bands.“If the need for some emergency support is required, it is certainly sensible to give people general spending power rather than, say, vouchers to cover energy bills. But this might more simply be achieved by a temporary increase in universal credit and delaying the introduction of higher national insurance rates. “Whatever relief is chosen, the government should be very careful not to be over-generous with public money and should seek spending savings elsewhere to compensate. And it should radically reconsider its energy policy.”
ENDS
Notes to editors
Contact: Emily Carver, Head of Media, 07715 942 731
IEA spokespeople are available for interview and further comment.
1 thought on “IEA economist responds to calls for a one-off ‘cost of living bonus’”
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Wouldn’t delaying NI hike and freezing tax thresholds simply keep inflation up as not as much money is being removed from the economy through taxation?
And when you say borrowing is “one of the factors behind rising inflation”, how significant a factor is it? Is this not more of a supply/demand inflationary issue?
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