Rishi Sunak is on the ropes, and not just over accusations that he has been less than transparent about his personal finances and those of his wife.

The chancellor looks as if he only needs a top hat and morning coat to complete his transformation to a hard-faced Victorian financier, aloof from the concerns of ordinary people. Details of his expensive homes, cars and holidays abroad only reinforce the image of a minister out of touch with his voters.

If he listened to the daytime radio phone-ins, he would hear the personal stories of hungry and shivering families brought low by the cost-of-living crisis. Those callers are selling cars, not buying them. They are delaying trips to the launderette for cost reasons and falling into arrears on debts.

Council tax increases stretching back more than five years play their part in pushing the cost of living higher, as does the freeze on income tax thresholds. A national insurance rise this month is another added cost, even though the chancellor will point out that it exempts low-income families. He forgets they are already under water after the loss of £20 a week from their universal credit income last year.

To escape criticism, Sunak draws attention to the one major element of the economy judged a success – the employment market. Almost everyone who wants a job has a job. What could be better?

Setting aside the fact that the unemployment figures are flattered by 500,000 people leaving the workforce, and that a lack of decent sick pay means many people with Covid work when they should be at home recuperating, the fact is that most of the people complaining about their dire circumstances are in work.

Most analysts expect labour market figures this week from the Office for National Statistics, covering the three months to February, to record another month of falling unemployment. But the data will show that inflation-adjusted wages are falling too.

In January, pay growth excluding bonuses was 3.8% among employees. Meanwhile, the consumer prices index rose by 5.5%. The situation in February is likely to be worse as wage growth stagnates and inflation, which we already know hit 6.2% that month, continues on its way to 8% or more.

In the fortnight since his spring statement, Sunak has refused to adopt any further measures to alleviate this financial squeeze on households. He won’t reinstate the £20 a week universal credit cut or increase the £150 council tax rebate. The £200 cut to energy bills in October is still a loan. He says the government’s finances are precarious, amid modestly rising debt bills.

One response could be to impose a windfall tax on North Sea oil companies, which could easily raise £4bn, to offset the worst of household inflation. But again, he refuses.

The business secretary, Kwasi Kwarteng, has spent more time than Sunak rejecting the opposition parties’ calls for such a tax, saying they misunderstand how business works.

Let’s take that claim head-on and ask what a windfall profit means to a business. That was a question asked by economist Olivier Blanchard – the former chief economist at the International Monetary Fund, who is still a driving force at the Washington-based Peterson Institute – in the 1990s. He found that windfall profits were not used by firms to fund investment because they were by definition unsustainable. Investments are planned over five years or more and based on forecast profits over that time, especially in the oil and gas industry.

However, if the excess cash were retained instead of invested, the company might become a takeover target. Another option might be to reward bosses with the windfall, but the bonuses would be unearned and shareholders would rightly object.

He concluded, after examining a string of situations where companies found themselves showered with money, that unless there were debt holes to plug, the only way to handle windfall profits was to distribute them to shareholders.

North Sea production companies, all of which are now swimming in cash from high oil and gas prices, are likely to follow the same course.

So it is Kwarteng who misunderstands business, and not Labour or the Lib Dems, when he says a windfall tax would undermine investment. He also misunderstands the stock market when he says pensioners are shareholders and would miss out on rising share values. How can that be when pension funds own less than 10% of the UK market?

All good chancellors steal the opposition’s best policies, and this is an occasion when Sunak could do himself a favour. Oil needs to stay in the ground and excess profits should be claimed back by those who generated them – the public.

Surely the government will do something. If it won’t tax the companies benefiting most egregiously from the war in Ukraine, the local elections in May could prove a turning point.