POLICY
‘Most people don’t need the money’ The argument: many households have built up large savings during the pandemic (the ONS has estimated that forced savings amount to over £140 billion, or around 10% of annual household disposable income), and other households are already receiving plenty of support from the Government. There is therefore no need to do more. The savings accumulated by households during the pandemic will allow some people to maintain spending despite falling incomes. But these savings are unevenly distributed, with many lower-income households and the ‘squeezed middle’ missing out. The changing context is also important. Even those who have already received a lot of support may still need more help in the autumn, when energy bills are likely to jump again. Of course, some tax cuts (and also some of the additional cost of living payments) may go to households ‘who do not really need the money’. However, there is always a trade-off between targeting support at particular groups (which is administratively difficult) and making sure that as few people as possible fall through the cracks. Above all, tax cuts are not just about supporting demand in the short term. They can also improve the supply-side performance of the economy for the longer term.
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