NatWest chair says best way to help poorest is through benefits

theguardian.com:

The chairman of NatWest bank has argued that changes to the benefits system would be the most effective way for the government to help the poorest families struggling to cope with the cost of living crisis, instead of cutting taxes that also give the wealthy a financial boost.

Sir Howard Davies, a former deputy governor of the Bank of England, said soaring energy bills and rampant inflation are disproportionately affecting the poorest fifth of households and they should be the focus of financial support measures.

“The squeeze on living standards as a result of higher energy prices and higher food prices is really extraordinary,” he said. “If you look at what people would need to do on their discretionary spending in order to offset those increases it’s massive. The bottom 20% of the population, they would have to reduce their discretionary spending by 20% to stay even financially.”

Davies said it is difficult to compare the scale of the cost of living crisis in a historical context because Covid lockdowns put the brakes on a lot of household spending, which meant£280bn more in savings were built up compared with pre-pandemic and that was providing a “cushion of liquidity”.

He said those with savings are able to carry on their lifestyles – pointing to the boom in the holiday market – and that an across-the-board tax cut would be a “blunt and very costly” and would also benefit those that don’t need it.

“I think what [the government] need to do is to look at the incidence of the problem and where the worst elements of the squeeze are taking place,” he told BBC Radio 4’s Today programme.

“The problem lies at the bottom end of the income distribution where those people don’t have savings for the most part and therefore they have