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Easing the cost of living

 

Whilst the Government celebrates every sign of economic recovery, the Opposition’s focus is on the cost of living crisis facing many households. Depending on how inflation is measured, the current rate of inflation is either 2.7% (Consumers Price Index) or 3.2% (Retail Price Index). Recent energy price increases and anticipated rail and air fare rises will not help to reduce these figures. On the other hand, average wages are rising at no more than 1%. Add to this the benefits cap, currently affecting at least four million households,  the so-called ‘bedroom tax’ that could hit 660,000 claimants with an average loss of £14 per week and a potential 10% cut in council tax benefit, there will inevitably be many households struggling to make ends meet. This is reflected in the increased numbers seeking help from food banks and taking out pay-day loans.

 

The Government will say this is part of reducing the structural deficit inherited from the previous Labour Government and rebalancing the economy but they must surely recognise their vulnerability to Opposition claims that they are out of touch with the pressures on ordinary people who see bankers and top people in business receiving big bonuses whilst they may have to choose between eating and heating their homes this winter. With a General Election 17 months away, they have to do something but what?

 

One option being canvassed is to cut taxes at least for the poorest households. VAT could be cut from 20% to 17.5% or the threshold for income tax increased to £12,500. The latter would do nothing to help those with no income to tax and any tax cuts would have to be matched by cuts in public services and spending that would lead to redundancies.

 

A second option is to increase wages. Ed Miliband is advocating a shift from the minimum wage to the living wage, something that Mayor Boris Johnson also backs. The current rate of the former is £6.31 and of the living wage is £8.55 (in London) and £7.45 (elsewhere). The problem with this is that some employers, especially SMEs may not be able to pay the higher rates that would put them out of business.

 

The third option, which is central to the Chancellor’s strategy, is to create more jobs through infra-structure investments such as HS2 and other public works. This will be funded by borrowing but is acceptable and would not necessarily drive up interest rates because the investments would yield incomes to pay off those loans. This is happening but is too long term to help cash-strapped households now and the Government’s electoral prospects in 2015.

 

Whichever policies are adopted it would be wrong to see this solely as an economic issue. The welfare of people, families and communities are involved, which makes this a social and moral issue. For Christians, obeying Jesus’ teaching to love our neighbours in desperate need, through food banks and similar initiatives, it becomes a spiritual issue as well.

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