IEA economist responds to calls for a one-off cost of living bonus

From: Think Tanks
Published: Tue Jan 25 2022

Professor Len Shackleton, editorial and research fellow at free market think tank the Institute of Economic Affairs, commented on the proposed one-off payment of up to 500 for families to deal with high energy bills

We are still facing a high level of government borrowing, which is one of the factors behind rising inflation. To increase borrowing to give people a one-off payment is a short-term fix. It does nothing to reverse long-term problems such as ill-designed green levies and virtue-signalling restrictions on fracking and oil and gas extraction.

The proposal is copied from the USA's Covid cheque. The US tax and welfare systems are very different from ours. This type of bright idea dissolves when faced with the complexities of UK taxes and benefits, and would be difficult to deliver quickly. It would create all sorts of anomalies as people move constantly on and off benefits and as pay changes shift people between tax bands.

If the need for some emergency support is required, it is certainly sensible to give people general spending power rather than, say, vouchers to cover energy bills. But this might more simply be achieved by a temporary increase in universal credit and delaying the introduction of higher national insurance rates.

Whatever relief is chosen, the government should be very careful not to be over-generous with public money and should seek spending savings elsewhere to compensate. And it should radically reconsider its energy policy.

Notes to editors

Contact: Emily Carver, Head of Media, 07715 942 731

IEA spokespeople are available for interview and further comment.

Company: Think Tanks

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