In March, Chancellor Rishi Sunak’s Spring Statement set out measures to tackle the cost of living crisis as inflation rises above 6%. However, the measures he announced, which include doubling the household support fund to extend it beyond its planned end in March, cutting fuel duty by 5p and increasing the rate at which national insurance has to be paid from £9,568 a year £12,570, will not go far enough in supporting those who need it most.

The Prime Minister himself acknowledged the precarious situation that many households are now facing. When asked whether families should eat cheaper food, not replace clothes, turn down the thermostat, or turn off the heating entirely, he said that “people obviously will face choices that they will have to make.”

The global cost of living crisis that we are now experiencing is not going to go away anytime soon, particularly as the Russian invasion of Ukraine creates further global uncertainty over oil supply, pushing up already steep prices. With Government and workers in the UK facing tough choices, the Work Foundation has looked at how other Governments are tackling the crisis.

Germany

Germany passed a package of measures to help households cope with the cost of living crisis, including a significant tax cut on fuel for three months by 30 cents for petrol and 14 cents for diesel. However, according to analysis by green transport group Transport & Environment, this will do little to help the worst off. They highlight that the richest 10% of drivers will receive seven times more in fuel tax cuts than the poorest, on average, because they consume far more fuel. The cost of a 90-day public transport ticket will also be cut to just €9 to encourage take-up of lower carbon travel, which is more likely to be of benefit to those on the lowest incomes.

Furthermore, all taxpayers in Germany will receive a one-off €300 payment to help with the rising cost of living, with a further €100 for each child and an additional €100 for anybody receiving state benefits. While the level of support for welfare recipients in Germany might seem relatively low, it is important to note that the German benefits system is much more generous than that of the UK in the first place, particularly in terms of unemployment benefits. For example, if a person becomes unemployed in Germany, they are entitled to 60% of their net wage (67% if they have children) for up to 12 months.

France

While households in the UK will see energy bills increase by up to 54% in April, energy companies in France have not passed along the high cost of wholesale gas to consumers. EDF, a state-owned energy company, has taken a €8.4bn (£7bn) financial hit to cap household bill rises at just 4%.

In December, low-income households also received a one-off payment of €100 to help with rising energy costs. Unlike the £200 loan that UK households will receive as energy prices rise again in October, French households will not have to pay this back.

Furthermore, from April, France will also be introducing a 15 cent-per-litre reduction on fuel. Unlike measures taken in Germany and the UK, in France distributors of gasoline and diesel will apply the discount at the pump and then will be reimbursed by the government, which Prime Minister Castex said is quicker than voting in a tax cut.

New Zealand

As well as drastically cutting taxes on fuel, with petrol excise duties slashed by 25 cents per litre, New Zealand has halved prices for public transport in response to soaring fuel costs.

As of last week, the Government in New Zealand took further action to ease pressures on low- and middle-income people. Minimum wage levels increased from $20.00 to $21.20 an hour, which should help a significant number of New Zealand’s lowest paid workers and their families – 300,000 people, according to the government. This increase of 6%, is in line with 5.9% annual rise in the consumer price index (CPI) in the December 2021 quarter.

Benefits payments have also been uprated, with jobseeker support, family tax credits and supported living payments increasing all increasing by 9-16% compared with July 2021 levels, depending on individual and household circumstances. With inflation still rising, it is likely that some of these increases are already being eroded by high living costs. However, this is still more generous than the UK, where benefits have only been uprated by 3.1%, in line with CPI inflation rates from September 2021.

With other major economies cutting the tax burden on working people, the UK is an outlier in it's decision to raise National lnsurance rates at this time. Overall, the measures announced by the Chancellor will not provide economic security to millions of people in the UK struggling to make ends meet in 2022, and the promise of tax cuts to come in 2024 will do little to reassure low income workers who are today already having to make compromises on day to day essentials including food and heating.

While a raising of the National Insurance Contribution threshold is welcome, Government needs to prioritise ensuring Universal Credit rises in line with the current inflation levels, to protect those most vulnerable to rising food, clothing and energy prices. In the absence of this, many more working families are likely to face hardship over the months to come.

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