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‘Nothing in the bank’- Treasury withheld financial support during cost of living crisis

News‘Nothing in the bank’- Treasury withheld financial support during cost of living crisis

The Whitehall sources stated money people didn’t spend while locked down at home during the pandemic was cited in discussions between Chancellor Rishi Sunak and his team as a key reason to limit further Government funding. A Whitehall source revealed: “There’s a lack of understanding among his team about how severe the situation is for those on the lowest incomes.

“They’ve got nothing in the bank.”

According to the report by The Independent, the move was condemned by senior officials involved in the talks for ignoring poorer households with no savings and those who had spent all they might have saved.

Inflation has reached fresh 30-year highs in recent months, and is set to rise further with an energy price cap increase this autumn.

The cocktail of rising prices pushed a closely watched index of consumer confidence compiled by market research firm GfK to a level of -38 in April − the lowest level since 2008, during the great financial crisis.

Unusual savings habits during the pandemic lockdowns informed the Treasury’s thinking, sources said.

Those with higher incomes were able to build up savings as they saw their spending on social activities, commuting and clothing fall.

In 2020, this effect pushed household savings up to levels not seen since records began in 1963.

Another insider told the publication that the approach had underestimated the scale of the cost of living crisis, which has produced the worst real income squeeze since 1945 and had failed to address the sharp inequalities between wealthy households and their poorer, income-dependent counterparts.

They said that this was “particularly apparent for those households who are out of work and on benefits” adding: “The real-terms impact on these households is, and will prove, quite devastating.”

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