Pressure on the government to help those hardest hit by the UK’s cost of living crisis has increased after the head of one of the country’s main employer groups said immediate aid was a “moral imperative”.
Tony Danker, the director general of the CBI, said Rishi Sunak must step in to help households who are skipping meals due to rising food and fuel bills.
Figures on Wednesday are expected to show annual inflation above 9%, and Danker said it was “unacceptable” that people were faced with the choice of whether to heat their homes or eat.
Sunak has pledged to increase support for those affected by the latest soaring energy prices following Russia’s invasion of Ukraine, and Danker called on the chancellor not to wait until the fall to act.
While the CBI head urged caution to bend some Tory MPs’ demands for a summer tax cut, the CBI head said Sunak must work on two fronts simultaneously.
“The first is to help people who are now facing real hardship; it is the moral underpinning of our economy and society,” Danker said. “Recent surveys suggest that more than one in 10 households have skipped meals – or had smaller ones – in the past month due to a lack of affordability, while about half a million households are expected to have to choose between heating and eating. Putting pounds in the pockets of those who struggle the most shouldn’t be put off.
“Second, start boosting business investment now — we’ll need to make sure there’s economic growth in the pipeline to avoid a downturn in our economy that could exacerbate or prolong the cost of living crisis.”
Danker said many of the people who run UK businesses have never experienced the current combination of high inflation and weak growth, adding that confidence in boardrooms and investors had been shattered.
Danker called for a five-point plan to boost investment: cash flow support for businesses; a commitment to green growth; drawing up a roadmap for infrastructure; ensure that the already announced money flows into the economy; and unlocking investments in digital.
“The chancellor’s clear intention to use an upcoming budget to cut taxes on corporate investment should now become a firm commitment,” he said. “It will ensure that any company that stops investing now will be courageous, determined and stand behind their original plans. This is important for everyone, because it guarantees that any growth retardation has a short and superficial shelf life.”
Danker was more cautious about supporting a full-fledged mini-budget, expressing concern that a major stimulus package would further fuel inflationary pressures.
“We must avoid major injections into economic demand that could exacerbate inflation, and focus on mobilizing the supply side of our economy. So major economic boosters should be delayed until it is safe to do so. Government must remain flexible and support the economy in the right way at the right time.”
The CBI is against financing a bailout package through a windfall tax on North Sea energy companies, but would support Sunak if he decided to target poorer households through a one-off payment or an increase in universal credit.
The average household’s energy bill rose by nearly £700 to nearly £2,000 a year in April, with the Bank of England forecasting a further rise of £800 a year in October.