Business Sec doesn't rule out cash payouts 'up to £500' to ease cost of living crisis

21 January 2022, 00:05 | Updated: 21 January 2022, 10:18

By Daisy Stephens

Millions of Brits could receive US-style cash payments from the Government to ease the burden of the soaring cost of living, according to reports.

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Chancellor Rishi Sunak is considering handing one-off sums of money to those struggling with soaring bills, in plans first reported by The Sun.

The paper reported that Mr Sunak had been locked in talks with Prime Minister Boris Johnson, Business Secretary Kwasi Kwarteng and a number of energy companies, to try and come up with ways to buffer the poorest families from the impacts of soaring energy prices.

Business Secretary Kwasi Kwarteng did not rule out the initiative going ahead. He told LBC this morning: “We are always looking at ways in which we can try and soften price rises, undue hikes in bills.

“I’m sure there will be more information about that in the next few weeks.

“There are lots of measures that have been talked about and ultimately it’s a matter for Rishi Sunak and his team at the Treasury. “We are trying to get to some common solution.

“We’ve got the warm home discount, which gives very vulnerable people, people on low incomes, support for bills. There’s also winter fuel payment as well.

“We are having conversations across government to see what more can be done.”

Read more: Cost of living crisis: Prices rise at fastest pace for 30 years

Read more: Soaring energy bills will 'devastate' families as cost of living continues to squeeze

The Treasury is now said to be investigating whether a one-off payment to the poorest households may be a better solution than slashing VAT on energy bills, which the Chancellor is reportedly concerned would give financial aid to richer households who do not need it.

The Social Market Foundation (SMF) - a thinktank with MPs from both Labour and the Conservatives on its board - has backed the idea, praising the simplicity of the scheme.

SMF chief economist Dr Aveek Bhattacharya wrote in a blog that many of the more complex solutions being suggested by the industry would encourage households to use more energy, as well as tie the Government into costly strategies that they would not be able to maintain.

"An emergency cash payment would also have the benefit of being a clear one-off intervention, whereas other proposals would risk committing the government to costly ongoing subsidies, that it would find politically difficult to end," he wrote.

He also said methods such a subsidising gas would prop-up energy companies and "muddle [the Government's] environmental objectives".

Read more: 'Cost of living catastrophe': Families face £1,200 hit as energy bills soar and taxes rise

Read more: LBC Views: There's no easy solution to the cost of living crisis for the PM

Experts at the Social Market Foundation have backed the idea of a one-off payment of up to £500.

The economist suggested that those not paying higher tax rates should get a payment of £300, and those on benefits should get an additional £200 on top of that.

If implemented, the system would mimic a strategy employed in the US by then-President Donald Trump in the place of a furlough scheme.

However, there are concerns about how such a scheme would work logistically in the UK.

The cost of living has soared in recent months.

On Wednesday Britain's rate of inflation shot up to its highest rate for nearly 30 years.

The Consumer Price Index (CPI) jumped from 5.1 per cent in November to 5.4 per cent in December - the highest level since March 1992.

A number of things are behind the surge, including the price of food and non-alcoholic drinks, petrol and second hand cars - and of gas and electricity bills.

Read more: Shadow Chancellor: Tax North Sea gas firms to help struggling families

Read more: BT to hike prices in 'work from home tax' as cost of living continues to soar

On Tuesday research from the Joseph Rowntree Foundation (JRF) found that single-adult households could soon be spending more than half of their income after housing costs on energy bills, after the expected increase in the price cap in April.

"Rising energy prices will affect us all, but our analysis shows they have the potential to devastate the budgets of families on the lowest incomes," said Katie Schmuecker, JRF deputy director of policy and partnerships.

"The Government cannot stand by and allow the rising cost of living to knock people off their feet."

And it's not just energy bills - on Thursday telecoms giant BT announced a huge price hike, saying most customers could expect to pay more than 9 per cent more on their bills.

The company blamed behavioural changes throughout the pandemic causing people's internet usage to surge, leading to the price increase being dubbed a 'work from home tax'.