Kate Forbes

With inflation reaching a 40 year high of 9% and forecast to rise higher, Ms Forbes has written to the Chancellor of the Exchequer urging the UK Government to use the £30 billion fiscal headroom it has available to help those struggling in the face of rising bills.

She said the Scottish Government is already taking action now to ensure targeted support is in place, within its reserved powers.

The letter states: “I am writing to outline the pressing need to act on the cost of living crisis. With inflation reaching a 40 year high of 9 per cent and forecast to rise higher; Brexit increasing food prices by over 6%; and the news that the energy price cap is set to rise to £2,800 a year in October, it is absolutely imperative that further action is taken to relieve the acute pressures being felt by households and businesses. The Scottish Government has already taken action and will continue to do everything we can to ensure people, communities and businesses are supported as far as possible. But, given the restrictions of devolution, only the UK Government has the economic, regulatory levers and fiscal headroom required to address this urgent crisis.”

Ms Forbes said that “Implementing a timely, targeted and cohesive economic support package that fully utilises your £30 billion of fiscal headroom would support households and businesses that are struggling now. Continuing to delay is prolonging the impact of the cost of living crisis on incomes, economic competitiveness and inequality and pushing households into debt and poverty, and risks pushing the UK into a recession.”

In the letter, the finance secretary proposed a set principles that should guide a response from the UK Government. These include:

• An emergency cost of living cash payment to all UK households with below median income, tapered to provide more support to those at the lower end of the income distribution. I would suggest this be up to £1,000 to those on the lowest incomes, to be delivered directly as cash support at periods across the financial year. Providing money directly, without a link to specific bills, would provide households with the means to manage the cost of living crisis however it is affecting them the most, whether it is on food, transport or energy bills, and offset the impact of the cost of living crisis for those on the lowest incomes. The Resolution Foundation has also called for a policy intervention of a similar design.
• Permanently uprate all social security benefits as if they had been increased by 10% in April to match the current level of inflation, as proposed by the Centre for Social Justice. In April, we increased our eight Scottish social security benefits by 6%, reflecting the higher inflation expected at that time.
• A further £25 uplift to Universal Credit, and for this to be extended to legacy benefits.
• Increase the National Living Wage rate of £9.50 to the Real Living Wage rate of £9.90 for all over 18.
• A temporary suspension of VAT on household energy bills, which we estimate would save the average household around £100 a year at current prices.
• Extend the £350 energy rebate scheme to small and medium enterprises, and remove the requirement to repay to the £200 energy bill reduction component.
• Remove standing charges for anyone with a pre-payment meter. The energy price increases will be felt more severely for consumers using prepayment meters who are often subject to higher prices for energy than through other means such as direct debit, and as standing charges must still be paid even if there is no credit on the meter, and top-ups can be swallowed up before energy can be bought. Removing standing charges would reduce the risk of self-disconnection if they cannot afford their energy costs.

The full letter can be read here.