Windfall tax still leaves poorest families £300 worse-off

A smart meter and Rishi Sunak talking about the windfall tax
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The government has announced a windfall tax to ease the so-called cost of living crisis. Think tanks have praised the measures and claimed the government is intentionally supporting poorest families the most.

But in reality, this is not the case at all. Because when you strip away the spin the fact is that the poorest families will still be £300 worse off this year. Moreover, it’s families with children who are getting the least support – and the government clearly knows this. So – its class war strikes again.

Windfall tax measures

Think tank the Resolution Foundation said chancellor Rishi Sunak’s plan for extra support for families included:

  • Payments of £650, made over two lump-sum grants, to over 8 million households on means-tested benefits;
  • An additional £300 on top of the usual Winter Fuel Payment this winter, going to all pensioner households;
  • An additional £150 to around 6 million people who receive a disability benefit;
  • Doubling the discount on all households’ electricity bills due this autumn to £400, and:
  • An additional £500 million for the Household Support Fund from October 2022.

It said this was on top of:

  • A £200 rebate on electricity bills, due to take effect this autumn, and a £150 Council Tax rebate for households in Bands A to D, both announced in February 2022, and:
  • An increase in the National Insurance threshold from £9,880 to £12,570 in July and a 5p cut to Fuel Duty rates announced in the Spring Statement.

So, what does the Resolution Foundation think all this will mean for families? It says that:

Of the £15 billion of new measures, almost double that announced earlier in the year, twice as much will go to households in the bottom half of the income distribution as the top half.

It also noted that:

Read on...

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The average gains from yesterday’s announcement are £823 across the poorest fifth of households, compared to £500 for the middle fifth of households, and £296 across the richest fifth

So, you’d think this was good news. But the devil is in the detail – and actually, people will still be worse off this year.

Leaving the poorest people with the least support

The Resolution Foundation admitted that:

the Chancellor has in effect offset 82 per cent of the anticipated rise in the household sector’s energy consumption, but this rises to 93 per cent for households in the bottom three income deciles [sic].

Resolution Foundation Energy Bill Offset Graph

But there’s more to this picture. As the Resolution Foundation’s graph above shows, the government is only making up for less than 80% of the poorest families energy price increases. And the think tank fails to say how much money this actually is.

In reality, if the government’s total measures this year only cover 80% of the fuel bill increase for the poorest families, they’ll still be at least £300 worse off. Moreover, this is without including inflation (price rises) on everything else – like food prices going up by 10.6%.

Hitting families and disabled people

Overall, the government plan leaves the poorest families with barely any more support than the richest ones. The Resolution Foundation’s analysis shows this:

Resolution Foundation Graph showing overall income gains by household

Factoring-in tax rises shows that overall in 2022 the richest are losing the most income. But this does not detract from the fact the poorest households are still worse off. Moreover, the detail of the government’s announcements shows that some will be losing out even more than others. For example:

  • If you didn’t have a live claim or one in progress on 25 May 2022 then the government won’t give you the first part of the £650. In April 2022, over 160,000 households made new claims to Universal Credit – so that means if that figure is similar every month from 25 May, hundreds of thousands of people may lose out.
  • People on new-style Employment and Support Allowance (ESA) and Jobseeker’s Allowance (JSA) are not entitled to the payment unless they get Universal Credit too. It is not clear even from the government’s own data just how many people this will affect. The government has not included everyone claiming Carer’s Allowance, either.
  • The government previously took away the Warm Home Discount from chronically ill and disabled people. So, the £150 payment only makes up for that – it is not extra support.
  • The Household Support Fund is a postcode lottery. Local councils decide who to give the support to and in what form.

The Resolution Foundations admits certain household groups will be barely supported at all. Specifically, these are families reliant on social security who have children. The think tank shows that the more kids you have, the less support you get. Three-child families will barely get 50% of the overall energy bill increase:

A Resolution Foundation graph showing how much support families with different numbers of children will get

However, back in the real world – just how will the windfall tax really help people?

Windfall tax: *comment*

Grassroots campaign group Disabled People Against Cuts (DPAC) Sheffield gave its reaction to the windfall tax. It told The Canary:

Rishi Sunak abandoning people on new-style and contribution-based ESA in his performative optics package of so-called ‘help’ shows that disabled people are of no concern to him or the ideology he represents… The whole system is inherently set up to placate and silence dissent from people on working-age benefits like Universal Credit. They know that people are being forced to claim it. They’re running a parallel ‘benefits’ system for the working poor as per the Victorian Poor Laws and ‘the deserving and undeserving poor’. We’ve barely moved on from that period.

Why have they done this? Who knows? They love divisive policies. A lot of Tory sympathisers will be looking at friends, neighbours and family on PIP who might claim slightly more in social security than they do. Those claimants might also be in low-paid work or have more savings than those people who are giving them the evil eye – who are getting jealous of them due to the lies they believe from media because they have even less of a fraction of sod all to live on. So, rather than fight and demand a ‘levelling up’ to come up to the same income as a government minister, the Tories know that their sympathisers in the working class will be happy for their friends, family and neighbours to receive even less.

The lived reality of a windfall tax

Moreover, the government has designed these one-off payments intentionally. It could have given the poorest families sustained support through an above-inflation social security increase. But instead the government is dropping in a lump-sum.

So, people would need to put all the cash on their prepayment meters. Or, they could deposit it into a separate bank account just for utility bills. Because otherwise, the likelihood is the money will be sucked up into other costs. When you’re poor and poverty defines your existence, surviving each day is a challenge. This is without micro-managing your finances to the extent of depreciating fuel costs across many months. Also, the fact that families reliant on social security who have kids are getting the least means that the money will probably just be sucked-up into day-to-day ‘surviving’ expenses.

But what about the energy companies in all this? As DPAC Sheffield told The Canary:

In the meantime, the energy companies pay a ‘windfall tax’. It helps the government detract from the useless Sue Gray report (stealing another crap idea from Labour) to give ‘support’ that still leaves millions of us unable to pay our fuel bills. That money goes back into our fuel accounts to go back to the energy suppliers – who are killing the planet and who are being given tax breaks to expand oil and gas exploration. The circularity and insanity of capitalism and the monetary system is writ large.

Class war

Once again, the government will know that the windfall tax will support the poorest people the least. It will know that families on social security with children along with chronically ill and disabled people will be worse-hit. Yet it, and think tanks like the Resolution Foundation, are presenting the policies as “progressive” and “back on target”. In reality, it is little more than the government continuing its class war on the poorest in society.

Featured image via The Canary and Sky News – YouTube

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  • Show Comments
    1. I just asked about this and, apparently, it’s those on Contribution-based benefits that are being left out – those on Income-based benefits will be getting them – although, personally, I feel that every single person who has to claim ANY benefit, whichever way it’s based, are poor, so all need help!

      It’s so typical of the tories to do something that will mean there will be the haves, and the have nots – a deliberate, and despicably divisive measure, that guarantees jealousy among those who get nothing, or those who don’t get enough!

      Of course, this is all done, very cynically, by a Party that learned how to Divide & Conquer very early on in their development! 😡

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