Rishi Sunak is to announce measures to tackle the cost of living crisis today. He will supposedly spend £10 billion. He will also announce a windfall tax on energy companies that will collect considerably less and be collected some time in the future, proving that (as always) spend comes before taxation.
It seems likely that some previously announced arrangements e.g. the enforced loan arrangements, will be scrapped. I suspect that this means the package will actually mean the package will be worth somewhat less than £10 billion in reality.
The likely replacement is some form of grant to lower income households. I sincerely hope a better measure of who these are than the council tax band of the property that they occupy will be found.
I suspect that the targeting of this will be hopeless. Increasing pensions and universal credit will be useful, but there will still be massive gaps that will be unaddressed. Sunak has form on this from the Covid era. Headlines matter much more to him than detail. He seems indifferent to the suffering his inattention to that detail creates.
What I can say with certainty is that package will be hopelessly inappropriate. Giving grants does not stop the inflation. In that case its impact, via increasing RPI and spillover into other prices and costs, like student loan interest, continue. This is precisely why I have kept saying prices themselves must be cut by reducing taxes on energy.
The quantum of the package is also too small. Even if it all got to the families facing fuel poverty they will only get £800 or so a year, but fuel costs alone will have risen by £1,500 by the autumn. And wage rises will not compensate by a long way, and they (which most commentators seem to forget when discussing the percentages on this issue) are taxed.
In the meantime, the failure to tackle the actual price rises will let the Bank of England persist with its ruinous interest rate increase policy until it is too late to prevent the harm it will cause.
The failure to come today is likely then to be fivefold.
First, too little will be spent on a feeble gesture to seek to deflect attention from Partygate.
Second, this spend will be poorly targeted.
Third, it will not stop the knock on effects of inflation.
Fourth, the claim that action is constrained by the inability to raise money is wrong. The Bank of England wilfully returned much more QE funding than will be spent today to financial markets in March, wholly unnecessarily, meaning no such constraint exists.
Fifth, the root cause of the problem - which is exploitation - will not really be addressed.
It is all likely to be a failure in the making. Sunak’s glory days at the Despatch Box are long gone.