Household Finances: Energy Bills Leap 5% As Latest Ofgem Price …

1 January: Regulator Blames Hike On Rising Wholesale Prices

Today sees the scheduled increase in the price cap maintained by the energy market regulator, Ofgem. Average bills will rise by 5%, with a typical household on a dual fuel tariff paying in arrears by direct debit seeing their annual costs increase from £1,834 to £1,928.

For customers who pay on receipt of a bill by cash or cheque, the cap will increase by £99, from £1,959 to £2,058 for typical dual fuel consumption. The cap for prepayment meter customers will increase by £99 from £1,861 to £1,960, again for average dual fuel consumption.

Ofgem is working with the government to remove the price differential for prepay customers, bringing their bills into line with direct debit payers, with the change planned for April 2024.

The cap, which is updated quarterly, limits what energy companies can charge per unit of energy used and in standing charges. It does not cap bills themselves, which will always reflect the amount of energy used.

Ofgem says the 5% increase reflects higher prices on wholesale energy markets. Analysts expect the cap to fall to around £1,850 in April thanks to lower ‘forward pricing’ of natural gas and the seasonal reduction in consumption as the winter recedes.

The figure will be confirmed in mid-February.

The cap for April 2024 – March 2025 will include a £16 ‘adjustment’ designed to fund a range of measures imposed on energy suppliers by Ofgem, such as providing swifter and more constructive support to customers who are struggling to pay their bills.

Critics of the latest increase in the cap point out that inflation in the UK stood at 3.9% in November, according to official figures, with further falls expected.

Ofgem is also being urged to overhaul the standing charges regime, which sees daily charges levied for connection to the gas and electricity networks regardless of actual usage. The regulator is running a consultation process on the future of these charges, which do not reward efforts to cut consumption.

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6 December: Consumers Dip Into Savings To Pay Monthly Bills

Consumer finances are showing severe stress due to the cost of living crisis, with mortgage arrears up by a quarter in the year to September, writes Jo Thornhill.

The figures come from the Household Finance Review from UK Finance, the trade association for the UK banking industry. Covering the third quarter of this year, they show that 99,480 mortgages are in arrears, up by 24% on 2022’s figure and by 9% on the previous quarter.

UK Finance says the situation could deteriorate further as more people come off cheap fixed-rate mortgages and find themselves on more expensive deals. It adds that mortgage activity is subdued in almost all sectors, but particularly for borrowers with a small deposit or equity in their home.

It also notes that households are continuing to use savings to cover increased monthly bills.

Savings deposits at the end of Q3 were 3% below the levels 12 months previously. This is a further acceleration on the 2% annual fall in levels seen in Q2 this year. There was a net reduction in overall deposit levels of £37 billion in the first three quarters of 2023. 

With regard to mortgage lending, UK Finance says the home purchase market was extremely weak in the third quarter, with 26% fewer home moves compared to 2022. 

First-time buyer activity was also subdued in the first nine months of 2023, recording a 22% fall compared to the same period last year.

Banks say that, for borrowers in arrears, the mortgage charter introduced in June is providing a range of temporary options, such as switching to an interest-only mortgage or extending the term or their current deal to make the monthly payments more manageable.

Remortgage activity was strong in Q3, although affordability pressures have led to more borrowers taking product transfer deals (new rates offered by an existing lender) rather than refinancing with a new lender. Borrowers do not have to go through a full affordability assessment for a product transfer deal.

Around 1.5 million borrowers came to the end of fixed rate deals in 2023. In the year to date nearly nine in 10 of the remortgages that occurred were internal product transfers.

This suggests borrowers are set to continue to face affordability challenges when looking to remortgage on the open market next year. UK Finance says it is likely to see a continuing preference for product transfers into 2024.

Laura Suter, director of personal finance at AJ Bell, says: “Mortgage arrears jumped in the third quarter of this year, as more people saw their fixed rate deal end and remortgaged onto dramatically higher rates – meaning they fell behind on repayments. 

“The mortgage charter is currently preventing these arrears numbers from rising more dramatically. However, these are all temporary measures and, as we’re not expecting interest rates to fall any time soon, at some point these homeowners will have to face the reality of higher rates – and many will fall into arrears.

“Anyone who is struggling to pay their mortgage or thinks they will struggle in the near future should approach their lender as soon as possible. You can get help and guidance on your options without it impacting your credit file.”

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22 November: Measures Designed To Boost Popularity At Polls

Chancellor Jeremy Hunt’s Autumn Statement, delivered today, contained a package of measures designed to revive the economy and reduce the general tax burden ahead of the expected General Election in 2024.

The centrepiece of his speech from a personal finance point of view was a cut in National Insurance Contributions (NICs), paid on earnings between £12,570 and £50,270, from 12% to 10%. Legislation will be introduced swiftly to allow this to take effect from 6 January 2024.

Someone earning the national average of around £33,000 will save around £450 a year as a result.

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Mr Hunt also announced measures to enable businesses to reduced corporation tax liabilities by offsetting captial investment.

The Chancellor forecast that inflation will continue to fall from its current 4.6% to 2.8% by the end of next year before reaching its long-term government target of 2% in 2025. The economy is expected to grow by 0.6% in 2023 and 0.7% next year. The 2024 figure has been revised down from 1.8%.

Although not mentioned in the speech in the House of Commons, the statement included a number of changes to the Individual Savings Account regime from next year, including the ability to open more than one particular type of ISA in any given tax year. Full details at the end of this piece.

Other measures in the Statement include:

National Living Wage: Ahead of today’s speech, the government announced an increase in the National Living Wage, from £10.42 to £11.44 an hour, to take effect in April 2024. Eligibility will also be extended from age 23 to 21.

National Minimum Wage: rates for younger workers will also increase, with 18-20-year-olds getting a £1.11 hourly increase to £8.60 per hour.

State pensions will increase in line with the Triple Lock^[2], rising by 8.5% from April to £221.20 a week.

Company pensions: The government will explore giving individuals a legal right to require a new employer to pay contributions into an existing plan, creating the concept of a ‘single pension pot’ for life.

Universal Credit and other benefits will increase by 6.7% from April, worth around £470 a year. Reforms will be introduced to incentivise those on benefits to join the workforce.

Mortgage Guarantee Scheme, where the government backs the provision of 95% loan-to-value mortgages for those with a deposit of up to 9.99%, is to be extended until the end of June 2025. It had been scheduled to close at the end of this year.

Local housing allowance (LHA): This cap on the benefit tenants in the private rental market can receive will rise from April after the Chancellor lifted the freeze on LHA rates, which tied them to rents in 2019-2020. The freeze meant fewer homes benefited from the cap as rents increased. The Institute for Fiscal Studies says that, when LHA was frozen in 2020, it covered a quarter of private rented properties, but that this has fallen to one in 20. The Chancellor says lifting the cap back to the 30th percentile of rents, using 2023 figures, will give 1.6 million households an average of £800 of support next year.

Self-employment: Compulsory Class 2 National Insurance Contributions are to be abolished from April, with Class 4 contributions paid on earnings between £12,570 and £50,270 to be charged at the reduced rate of 8% (from 9%), again from April.

Small businesses: The government will act to tackle late payments, as called for by the Federation of Small Businesses. The freeze on business rates has been extended by a year, as has the 75% business rates discount for firms in the hospitality, retail and leisure sectors.

Alcohol Duty remains unchanged, with the next review scheduled for 1 August 2024.

Tobacco Duty on hand-rolled cigarettes will increase by 10% more than the duty escalator that applies to other tobacco products. This stands at retail price inflation plus 2%, meaning hand-rolled tobacco will increase by RPI plus 12%.

Individual Savings Accounts: From 6 April 2024, it will be possible to:

• open and pay into more than one of each ISA type every tax year
• make partial balance transfers between providers
• hold certain fractional shares in a stocks and shares ISA.

Additionally, it will no longer be necessary to reapply for a dormant ISA (one that hasn’t been touched for two years) if you want to pay into it again, while Innovate Finance ISA holders will be able to invest in Long-Term Asset Funds and open-ended property funds.

What does this mean for you?

Under current ISA rules, an individual’s £20,000 annual ISA allowance can be spread across different types of ISA – for example, £15,000 into a cash ISA and £5,000 into a stocks and shares ISA – but only one of each type of ISA is permitted to be opened.

From April, this limit will no longer apply.

Dean Butler, managing director for Retail Direct at Standard Life, said: “The ability to start saving into another cash product mid-way through the tax year could prove to be a major win for people in this situation and could also incentivise providers to improve rates.

“There are also likely to be some customers who want to mix fixed-rate deals and easy access savings to give them greater flexibility with their savings.”

Elsewhere, stocks and shares ISA^[3] holders have a little more flexibility when it comes to choosing their investments, with the ability to hold fractional shares in their account (a fractional share is a slice of a single share that is too expensive for many people to buy outright).

The government is to consult on the details of this change.

Innovative Finance ISAs^[4], which previously only allowed investment in peer-to-peer loans and crowdfunding, have also opened up to longer-term investment opportunities.

Customers will be able to put money into Long-Term Asset Funds, which invest in long-term projects such as property and infrastructure developments, and open-ended property funds.

Allowances will remain frozen at £20,000 per year for ISAs, £9,000 for Junior ISAs and £4,000 (excluding government bonus) for Lifetime ISAs.

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9 November: Car Insurance Premiums Up 29%

The increased cost of car parts, paint and labour pushed up car insurance premiums by 9% in the three months to the end of September and by 29% in the past 12 months, according to the latest figures from the Association of British Insurers, writes Jo Thornhill.

The average annual premium payment is now at a record high of £561, £60 more than in the second quarter.

Insurers blame rising costs in the car repairs market which are pushing up the cost of claims. These include rises in Quarter 3 of 16% for the cost of materials, 15% for labour, 11% for spare parts and 46% for other costs, largely driven by the price of energy.

In addition, insurers are reporting that, as cars are becoming more sophisticated in terms of computer technology, they are more expensive and difficult to repair. A shortage of skilled technicians is also leading to increasing costs as repairs have to be delayed.

Cars being off the road for longer while repairs are made is also bumping up the cost of providing courtesy cars, which again feeds through to premiums.

The ABI is calling on the government to cut the rate of insurance premium tax (IPT), currently 12%, to help motorists struggling with rising costs. The Association says IPT typically adds £60 to the cost of a car insurance premium.

IPT generated £7.45 billion in tax revenues last year.

Mervyn Skeet, ABI director of general insurance policy, says: “Another quarter of increased motor insurance premiums will be concerning for households who are already grappling with rising costs in other areas. 

“Insurers continue to do all they can to keep motor insurance as competitively priced as possible, despite facing substantial increases in costs outside of their control.”

Tips to cut the cost of car cover:

• Always shop around at renewal, preferably two to three weeks before your renewal date, so that insurers don’t think you’re in a hurry and charge more
• Challenge your existing insurer to see if they will drop their renewal quote to keep your business
• Consider increasing your voluntary excess in return for a lower premium, but always make sure the excess is affordable
• Always factor in likely insurance costs when buying a brand new or new secondhand car
• If you cannot afford your premium in one go, insurers will let you pay monthly, but they will charge interest at a rate of 20% or more. One tactic is to take out a credit card with a minimum period of 12 months where 0% interest is charged on purchases, and put your premium on that. But you must commit to clearing the debt within 12 months or you’ll end up paying for next year’s cover before you’ve settled this year’s premium.

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9 November: Credit Card, Utility Payments Most Missed

More than 16 million adults have missed at least one household bill payment this year, according to a study by the government’s Money and Pensions Service (MaPS), writes Bethany Garner. 

Of those who missed a payment, 14% said it was the first time they had done so. 

The study, which surveyed 3,016 UK adults in October, was commissioned to mark Talk Money Week, running this week.

The aim is to get people talking about money and do one thing that could improve their finances, such as contacting creditors, taking energy saving measures^[5] or using a balance transfer credit card^[6] to avoid expensive interest payments. 

The study found that credit card and utility bills are the most likely to go unpaid. Of the respondents who said they had left a bill unpaid this year, 11% skipped a credit card repayment, while 10% missed a utility bill.

A further 10% said they had missed a Council Tax payment, while one in 20 had missed a rent or mortgage instalment.

Despite the high prevalence of respondents in arrears with their bills, 15% told MaPS they would do nothing if they were heading for financial trouble.

Meanwhile, over a third of respondents (38%) said they would not contact their creditor if they fell into arrears, with 20% of this group feeling too embarrassed to discuss the issue, and 15% unwilling to disclose their personal circumstances.

A further 15% were not aware that creditors could do anything to help, despite the fact that energy suppliers are obligated to help struggling customers find a payment solution, while other creditors may be able to offer a repayment plan, or temporarily pause repayments.

Charlotte Jackson, head of guidance at the MaPS, said: “If you think you’ll miss a payment, speak to your creditor. And if it’s already happened, it’s not too late to consider free debt advice. Acting now will help you get some control over what’s happening, find out your options and avoid the devastation that debt can cause.“It can be really difficult to take that first step, but it can make a massive difference. If you’re unsure where to start, our free and impartial guide on starting the conversation is available now via our MoneyHelper service^[7].”

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25 October: Losses From ‘Push’ Scams Reach Record High

Fraudsters stole £580 million from British consumers and businesses in the first six months of 2023, according to data from industry body UK Finance, writes Bethany Garner.

Authorised push payment (APP) scams, where criminals trick victims into transferring cash under false pretences, accounted for £239.3 million of these losses, the highest figure on record. Around 116,000 people were affected.

This represents a 22% increase in APP losses compared with the first six months of 2022. 

According to UK Finance, over three quarters of APP scams originate online, with social media platforms facilitating criminals’ reach and success. 

However, they account for just 32% of financial losses, since this category includes a high proportion of lower-value fraud such as purchase scams (where consumers are tricked into buying goods that never arrive).

These scams accounted for £40.9 million of losses in the first half of 2023, up 43% year-on-year.

Laura Suter, head of personal finance at investment platform AJ Bell, said: “Ultimately, much of this fraud spreads on social media, with the ease of generating accounts and posts meaning scammers can cast their net far wider. 

“The speed at which a scammer can contact hundreds of people via social media, in comparison to scams where the fraudster has to call up each individual, means that more people can be targeted.” 

APP scams where the victim was contacted via telephone accounted for 45% of recorded losses, despite representing just 17% of cases. 

Earlier this year, the Financial Conduct Authority placed a total ban on financial cold calls, meaning consumers should consider any unexpected phone calls about finance to be a scam (see story below from 2 August).

Criminals who still contact customers over the phone are often involved with investment fraud, where victims are persuaded to part with their cash to buy into fake or misleading investment opportunities.

Investment scams made up almost a quarter of financial losses from APP fraud in the first half of 2023 at £57.2 million, UK Finance found. 

Despite financial losses from APP fraud reaching record highs, £152.8 million worth of losses (64%) were returned to victims between January and June 2023. This is an increase of 13% compared with the £135.6 million returned to APP fraud victims in the first half of 2022.

Ms Suter said: “So often people feel embarrassed or ashamed of being defrauded and therefore don’t report it, while others assume that nothing can be done to get their money back, so it goes unreported. 

“Anyone who has been the victim of fraud should contact Action Fraud^[8] and their bank, as they may be able to get their money back.”

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19 October: Netflix Tiers See £1/£2 Monthly Price Increase

Netflix has increased its subscription prices, effective immediately, a little over 18 months since it last put them up.

In a letter to shareholders yesterday, Netflix said prices for UK subscribers are going up to £7.99 for its Basic plan (up by £1) and £17.99 per month for its Premium tier (up by £2).

It notes in the letter: “Our starting price is extremely competitive with other streamers and at $6.99 (£5.77) per month in the US, for example, it’s much less than the average price of a single movie ticket.”

Netflix has four bands of membership. In addition to the Basic (which allows one screen) and Premium (four screens) tiers mentioned above, there is a ‘with ads’ tier and a standard tier, priced at £4.99 and £10.99 respectively. These prices are not being increased.

The streaming service has added nearly 9 million new subscribers worldwide after it effectively banned password sharing among its users earlier this year.

Subscriber numbers for the third quarter of the financial year were up 11% on the previous year, at 247 million. Shares in the company (NFLX) rose by 12% following the announcement. To learn more about investing in Netflix, read our guide here^[9].

Netflix isn’t the only streamer tinkering with its prices. Disney+ will also get more expensive from 1 November as it introduces a new tiered approach to subscriptions.

From that date, a standard subscription with adverts will cost £4.99 per month, a standard subscription will cost £7.99 per month and a premium subscription will go up to £10.99 per month. 

Previously, subscriptions cost £7.99 for all users. Existing subscribers will be upgraded to the premium tier for no extra fee until their subscription comes up for annual renewal after 6 December.

Streaming platforms have been negotiating strikes with actors, writers and directors’ unions over the summer, with disputes over residual payments (royalties for the ongoing broadcast of films and TV episodes) bringing productions to a halt. 

While the Writers Guild of America (WGA) reached an agreement with the Alliance of Motion Picture and Television Producers (AMPTP) on 24 September after more than 140 days of strikes, the dispute between the The Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) and the AMPTP is ongoing.

5 October: Private EV Sales Tumble Amid Market Uncertainty

New car registrations were up 21% in September as the new ‘73’ number plate, released at the beginning of the month, delivered its traditional market surge, writes Jo Thornhill.

There were 272,610 vehicles registered in September, making it the 14th consecutive month of increases and the second busiest month of the year after March (when the ‘23’ plate was released), according to figures from the Society of Motor Manufacturers and Traders (SMMT).

Fleet car sales drove much of the growth, with 143,256 new vehicles registered. This is a 40.8% uplift on figures from September 2022. Overall market share for fleets is now 52.5%.

Private car registrations were up 5.8% year-on-year. With 122,944 new cars registered, it was the best September figure since 2020, but numbers remain around 20% below pre-pandemic levels.

Source: SMMT

The best sellers by make and model in September were:

• NIssan Qashqai (8,565)
• Ford Puma (8,087)
• Kia Sportage (5,739)
• Ford Kuga (4,638)
• MG ZS (4,613)

Plug-in hybrid vehicle registrations (PHEVs) are up 50.9% year-on-year and battery electric vehicles (BEVs) recorded their 41st consecutive month of growth, with 45,323 drivers making the switch, an uplift of 18.9%.

But increases to BEV registrations were driven by fleet purchases, with private BEV registrations falling by 14.3%.

Registrations of petrol vehicles were up 15% in September (year-on-year) and now have a 38.7% share of the overall market (down from 40.7% in 2022). Diesel vehicles fell by 4.2% last month and have a 3.6% share of the market (down from 4.6% last year).

The new cars market – in particular as far as electric vehicles are concerned – has been thrown into turmoil by the government’s decision to delay the ban on the sale of new internal combustion engine cars by five years to 2035.

Despite this change, announced by the prime minister last month, manufacturers will still need to ensure that a minimum percentage of their sales are EVs each year from next year onwards. In 2024, this figure will be 22%, and the percentage will rise each year thereafter.

Mike Hawes, chief executive at SMMT says the decline in private EV registrations underlines the importance of providing motorists with incentives: “With tougher EV [sales] targets for manufacturers coming into force next year, we need to accelerate the transition, encouraging all motorists to make the switch. 

“This means adding carrots to the stick – creating private purchase incentives aligned with business benefits, equalising on-street charging VAT with off-street domestic rates and mandating chargepoint rollout in line with how electric vehicle sales are now to be dictated.

“The forthcoming Autumn Statement is the perfect opportunity to create the conditions that will deliver the zero emission mobility essential to our shared net zero ambition.”

At present, the electricity used to charge an EV at home attracts VAT at 5%, while on-street energy suffers VAT at 20%.

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29 September: ‘House Of Mouse’ Follows in Netflix’s Footsteps

Disney’s streaming platform, Disney+, is following Netflix’s lead with its own crackdown on account sharing.

The service, which is home to popular TV series such as Bluey and several Star Wars shows, will begin efforts to stop paying subscribers in Canada from sharing their passwords with non-subscribers from 1 November.

It is expected to follow Netflix’s lead and roll out its anti-sharing messaging to other countries, including the UK, later in 2023 and in 2024

The ‘House of Mouse’ has started informing Canadian subscribers that their accounts are not to be shared outside of their own households, following a change to the service’s terms and conditions which will take effect from the start of November.

The wording reads: “Unless otherwise permitted by your Service Plan, you may not share your subscription outside of your household.  ‘Household’ means the collection of devices associated with your primary personal residence that are used by the individuals who reside therein.”

Like Netflix, Disney+ will monitor how its subscribers use the service and, where it suspects users are sharing their login credentials, will issue warnings. Repeat violations will, according to its new T&Cs, result in accounts being terminated.

The start of the crackdown coincides with the introduction of new Disney+ subscription tiers, including a cheaper subscription subsidised through advertising.

Netflix was first to the market with its sharing crackdown in the spring. While it was unpopular with users and expected to result in unsubscriptions, Netflix says it has since added 5.9 million subscribers.

Those sharing their accounts with friends and family members were given the option to pay a premium, per user, to effectively continue sharing their accounts.

A standard subscription to Disney+ currently costs £7.99 per month, or £79.90 per year. From 1 November there will be three options for subscribers:

• £4.99, ad-supported subscription with no download option and simultaneous streaming on two devices
• standard £7.99 subscription without ads and with the ability to download content
• premium, ad-free, £10.99 per month subscription that allows downloads, simultaneous streaming on four devices and 4K, ultra HD streaming.

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7 Sept: CMA Highlights Bill Inflation And Practice Consolidation

The cost and provision of veterinary services in the UK is under review amid concerns that pet owners are not getting good deals during the cost of living crisis, writes Candiece Cyrus.

The Competition and Markets Authority (CMA), which launched the review today, says the rising cost of veterinary services has outpaced inflation.

It also has found that pet owners are not receiving the information they need to make good choices when it comes to getting suitable treatment for their pets, including knowing which vet to use, and the correct services to purchase.

It says pet owners may be unaware that one company can own hundreds of practices, which can reduce competition and choice. Its most recent data shows that 45% of practices were independent in 2021 compared to 89% in 2013. 

The CMA launched an investigation into the biggest group, IVC, in December last year after it acquired eight independent vet businesses. In total IVC owns 1,000 practices across the UK.

In today’s announcement, the CMA also says that customer interests may be harmed by the fact that practices sell products and services such as diagnostic tests and treatment at specialist facilities that are provided by their parent company.

Sarah Cardell, chief executive of the CMA, said: “Caring for an ill pet can create real financial pressure, particularly alongside other cost of living concerns. It’s really important that people get clear information and pricing to help them make the right choices.

“When a pet is unwell, they often need urgent treatment, which means that pet owners may not shop around for the best deal, like they do with other services. This means they may not have the relevant information to make informed decisions at what can be a distressing time.”

The CMA is asking pet owners and vet practitioners about their experiences via the gov.uk website, including whether pet owners pay for vet services upfront or by claiming on a pet insurance policy. 

Forbes Advisor found that 47% of pet owners have not taken out cover for their animals, and 45% say it’s because insurance costs are too high. However, Forbes Advisor’s research reveals that a cheap maximum benefit policy can cost around £11 a month for a dog.

The price a pet owner pays for insurance reflects the cost of vet services where they live among other factors. However, by shopping around pet owners can find deals on their insurance. 

A spokesperson for the Association of British Insurers said: “With no NHS for pets, insurance can provide the peace of mind that should anything happen to your pet you will be covered. The cost of pet insurance largely reflects the high cost of veterinary treatment, including drugs and diagnostic equipment, which can result in more expensive claims, and pet insurers paid out £2.8 million a day in 2022.”

The CMA plans to provide an update on its review in early 2024.

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1 Sept: Insurer To Contact Policyholders Where Redress Is Due

Direct Line is setting aside £30 million to reimburse home and car insurance customers it overcharged for policy renewals, writes Mark Hooson.

The insurer has agreed to launch a ‘past business review’ to investigate mistakes it made with regards to Financial Conduct Authority (FCA) rules around pricing for new and existing customers.

The rules, which came into effect on 1 January 2022, say insurers must charge new and existing customers the same prices for equivalent cover. 

However, existing Direct Line customers were charged more for renewals than they would have been as new customers.

In a statement the insurer said: “An error in our implementation of these rules has meant that our calculation of the equivalent new business price for some customers failed to comply with the regulation. As a result, those customers have paid a renewal price higher than they should have.”

The FCA says this is the first time a formal voluntary requirement has been agreed with a firm in relation to its motor and home insurance pricing rules. 

Direct Line customers do not need to take action and will be directly contacted by Direct Line if they have been affected by overcharging. 

Russ Mould, investment director at AJ Bell said: “The greater damage to Direct Line from the £30 million cost to cover over-charging customers for insurance products is to its brand and reputation – even if the financial cost will sting too. 

“It compounds a really tough period for the company – inflationary pressures on claims have helped undermine its credentials as a reliable income stock.”

22 August: First-Time Buyers Face Struggle To Get On Ladder

Renting is cheaper than buying a home, on average, for the first time since 2010, according to data from online property portal Zoopla, writes Jo Thornhill.

Typical monthly rent is now £122 cheaper than buying an average-priced property as a first-time buyer. The change is down to higher mortgage rates pushing average home loan repayments up.

But while rents are now cheaper on average across the UK than first-time buyer mortgage payments, renting is still more expensive in six regions, including Scotland, the North East, Northern Ireland, Wales, Yorkshire and Humberside, where average properties to buy tend to be cheaper.

In London, the average first-time buyer home costs £522,000, according to Zoopla. If buyers have a 15% deposit of around £78,000 it would mean a monthly mortgage repayment of £2,546 (this is assuming a mortgage rate of 6% over a 30 year term). But to rent the equivalent property would cost £2,053, a difference of almost £500.

In contrast in Scotland, where average first-time buyer homes are £127,000 and the average mortgage payment is £620 per month, rents are at £748 for the same property, making renting more costly.

Historically, renting has been cheaper than buying, but as rental demand has increased, competition for good quality rental homes has pushed rents up. It has meant that average rent has been more expensive than buying a similar property for over a decade in most parts of the country.

Izabella Lubowiecka, senior property researcher at Zoopla, says: “It’s a tough housing market for first-time buyers, with high mortgage rates pushing up costs for those attempting to step onto the ladder. In fact, our research found that nationally, it’s now cheaper to rent a home than buy one for the first time since 2010. 

“But the picture varies enormously across the country. In large parts of the North and across Scotland and Wales, it’s still more cost-effective to stump up for monthly mortgage repayments than rent. 

“We’re seeing first-time buyers get more creative with their home move – considering alternative areas to start their search, looking for more modest properties or buying with friends or family. 

“We also predict house prices will fall around 5% over the course of 2023, and mortgage rates may have already peaked, which might be the nudge many first-time buyers need to move ahead with their purchase.”

Soaring mortgage rates are causing more people to downsize and move back to cities, a reverse of the trend seen during the Covid-19 pandemic when there was an exodus away from urban areas. 

A survey of more than 2,000 people by property tax experts Cornerstone Tax has found that one in 10 people (six million) intend to move closer to a city in the next five years due to benefits of the proximity to amenities, such as schools, transport links and shops. 

A further 11% of workers report they’ve already had to move away from a rural area because they could not afford the cost of living and commuting to work. Many have downsized and are now renting property closer to a city. 

Younger workers are leading this march, with more than one in five aged 18 to 24 saying they’ve moved from a rural area to a city since the pandemic.

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11 August: Cost Of Repairs Pushes Premiums To Record High

The cost of motor insurance^[10] has hit an all-time high according to the Association of British Insurers, writes Candiece Cyrus.

It found the average premium between April and June this year was £511 – an increase of 7% on the previous quarter’s figure of £478 and 21% up on the same period last year. The figure is at its highest since ABI started collecting this data in 2012.

The average price paid by those renewing their cover rose by £36 on the previous quarter, to £471, while the average premium for a new policy was up £21 to £566.

The ABI says the distinction reflects the different risk profile of new and renewing customers. For example, a new customer is more likely to be a younger, less experienced driver. 

It says motor insurers paid out £2.4 billion in claims in the first quarter of this year. This is an increase of 14% on the first quarter of 2022.

The cost of vehicle repairs soared by 33% in the year since the first quarter of 2022 to £1.5 billion – the highest figure since ABI started recording this data in 2013. 

Replacement parts for many popular cars have also increased in cost between 12 – 21% over the past year, while labour costs have reportedly risen by up to 40%.

Analysis from consultancy firm Ernst & Young, released in June, revealed that “the UK motor insurance market experienced its worst performing year in a decade in 2022”.

It found that for every £1 motor insurers received in premiums, they paid out £1.10 in claims and operating costs – this gives a figure known as the ‘loss ratio’ of 110%.

Mervyn Skeet, the ABI’s director of general insurance policy, said: “These continue to be tough times for many motorists and motor insurers alike. With many families facing higher cost of living bills, no one wants to see the cost of their motor insurance rise. 

“Insurers remain determined to ensure that motor insurance remains as competitively priced as possible, but this has become increasingly challenging, given the continued rising costs that they are facing. 

“We would urge anyone concerned about being able to afford their insurance to speak to their motor insurer to see what options might be available. And despite cost pressures, it can still pay to shop around to get the policy that best meets your needs at the most competitive price.”

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2 August: ‘You Will Be Able To Assume Any Cold Call Is A Scam’

The government is consulting on plans to ban completely cold calls offering financial products, writes Bethany Garner.

The intention is to ensure any cold call on a financial topic can automatically be regarded as a scam.

The plans – first trailed on 3 May (see dated story below) – are designed to tackle scammers^[11] who contact victims out of the blue to offer fake investment opportunities or other non-existant or fraudulent financial services. 

Cold calls relating to pensions have been banned since 2019, but these new measures will extend to all financial products including insurance, cryptocurrency, and investments. 

According to City of London Police figures, fraudulent investment schemes cost victims £750 million between 2022 and 2023 alone.

Andrew Griffith, economic secretary to the Treasury, commented: “Cold calling for financial services and products has long been used by fraudsters to manipulate and trick members of the public into scams.

“We will ban cold calling for all consumer financial services and products, so the public can be sure that it’s not a legitimate firm if they get a call about a financial product out of the blue without their consent.”

The ban forms part of the government’s Fraud Strategy, which will also require payment processing companies to reimburse customers who fall prey to authorised ‘push payment’ scams. 

During these scams, victims are tricked into sending money directly to a fraudster, who may be posing as a legitimate business or government body. The regulations will come into effect in 2024, and apply to around 1,500 payment services.

In conjunction with these measures, a new Online Advertising Programme aims to tackle fraudulent advertisements on social media – another key communication channel for scammers. 

Anthony Browne MP, a vocal anti-fraud campaigner, said: “Eighty percent of fraud is cyber-enabled and often starts with scam social media posts, a fraudulent email or false advertising, and this makes engaging with the tech sector particularly important.”

Tom Selby, head of retirement policy at AJ Bell recommends avoiding investment schemes that offer guaranteed returns: “Scammers often promise double-digit returns through exotic investments in far-flung locations. Promoting cryptocurrency investment ‘opportunities’ has also become an increasingly popular route for fraudsters.

“The grim reality is that, even with new rules and tough enforcement, scammers will continue their attempts to plunder people’s hard-earned savings. It is therefore vital, regardless of what the government does, that Brits keep their wits about them.”

Mr Selby says people should simply hang up the phone if someone contacts them to talk about their finances out of the blue, and that they should only deal with regulated financial advisers which are on the Financial Services Authority register.

The consultation will remain open until 27 September. Responses are invited to: [email protected]^[12]

26 July: Experts Fear New Investors May Suffer Shock Losses

A two-year period that began at the height of the Covid-19 pandemic in 2020 saw the UK experience a retail investing boom, according to the Financial Conduct Authority (FCA), writes Andrew Michael.

The latest FCA Financial Lives survey of more than 19,000 respondents reports that 41% of adults in the UK – 21.8 million people – held an investment product of some sort in May 2022, an increase of nearly two million (37%) compared with two years earlier.

The regulator says that direct holdings of shares, held by 21% of the UK population and equating to 11.3 million adults, and stocks and shares ISAs^[13] (individual savings accounts), owned by 17% of the population representing 9.1 million adults, continued to be the most-commonly held investment products in 2022 “by far”.

It added that the overall number of adults holding shares and equities rose by one percentage point between 2020 and 2022, and by three percentage points for stocks and shares ISAs.

The FCA reported that there has been an almost three-fold increase in the proportion of adults holding cryptoassets^[14] over the last two years, from 2% in February 2020 to 5.8% in May 2022.

According to the regulator, men were over one and a half times more likely to invest in May 2022 compared with women. It added that investing is closely related to age and income, with older adults and adults on high household incomes more likely to hold investment products than younger adults or those with lower incomes.

The FCA said there had been a notable increase in the proportion of younger adults, particularly younger men, holding investment products between 2020 and 2022. The proportions of 18- to 24-year-olds and of 25- to 34 -year-olds with these products increased by 9 and 11 percentage points, respectively.

On average, new young investors tended to have higher risk appetites than other investors. Around one in six (16%) said they have a moderate to high willingness to take risk when investing, compared with 4% of new investors aged 55 and above and 12% of all investors.

Over half (56%) of new young investors said they held one or more high-risk investment products. For most, these were crypto assets, with 46% of new young investors saying they held these.

The FCA said that owning high-risk investment products had grown in popularity over the two-year time period in question, with 8% – or 4.1 million – of the adult population holding either cryptoassets, peer-to-peer lending, innovative finance ISAs and investment-based crowdfunding or a combination of these, up from 4% (2.3 million) in 2020.

Laura Suter, head of personal finance at AJ Bell, said: “A big chunk of these new investors are risk-hungry men who are investing outside of tax wrappers and using social media for their research – meaning there is a potential for a shock coming down the line for some of this new wave of investors.

“Two-fifths of new investors are investing directly in shares outside of an ISA wrapper, presumably driven by the rise in trading apps that boomed during the pandemic. While many may enjoy direct investing, rather than investing via funds, it’s unlikely to be the ideal starting point for many inexperienced investors.”

The latest Financial Lives research also found that 7.4 million people attempted, unsuccessfully, to contact one or more of their financial services providers in the 12 months up to May 2022.

It also reported that less than half of UK adults, or 21.9 million people, had confidence in the UK financial services industry, with just over a third (36%) agreeing that most financial firms are honest and transparent in the way they treat them. 

The regulator’s findings come only days away from the introduction of the FCA’s Consumer Duty^[15] regime. The FCA expects the Duty to prompt a major shift in the financial services landscape that “will promote competition and growth based on high standards”.

Sheldon Mills, executive director, consumers and competition at the FCA, said: “Our Consumer Duty will guide our ongoing work to improve the way firms provide customer support – getting through to your provider is the starting point for receiving help, so we will be working with them to improve in this area.”

18 July: Shapps Gives No Indication Of Petrol Price Controls

Following his online meeting yesterday with the chief executives of Asda, Tesco, Morrisons and Sainsbury’s, as well as the bosses of BP, Shell and Esso, energy minister Grant Shapps has told retailers to stop overcharging for fuel, writes Jo Thornhill.

In a video posted on social media, Mr Shapps said: “When their costs were falling, they kept prices high and refused to pass on the savings to you.

“There’s no excuse and the government is saying enough is enough. We’ve demanded an immediate end to overcharging, and I told bosses they must hand over their price data. This will mean that you can find the best deal, and you can be alerted if anyone tries to rip you off again.”

While Mr Shapps did not quantify the level of overcharging or specify what might be deemed a fair price, a Competition and Markets Authority (CMA) report published earlier this month found some retailers have been over-charging drivers up to 6p per litre.

The CMA said this equated to extra profits of around £900 million for retailers last year.

The idea of building a live price database is that drivers would be able to compare real-time fuel costs at local pumps through an app, for example, or on a comparison sites. No details were provided about the provision of alerts in cases of ‘rip off’ pricing.

It is thought that, if retailers spurn the opportunity to sign up voluntarily to the initiative, the government will consider making it a legal requirement.

Mr Shapps has said he will also appoint a public body to monitor petrol prices and alert the government when costs go up. He hopes the move will encourage competition across the sector and drive down prices.

Critics of the plan suggest it could lead to motorists converging on outlets with the cheapest prices, leading to queues and congestion.

The high price of petrol has also been highlighted by Bank of England governor Andrew Bailey as a factor keeping inflation high. Inflation was recorded at 8.7% in May (the Bank’s target is 2%) and has been the driver behind the rapid rise in interest rates.

The inflation rate for June will be published by the Office for National Statistics this Wednesday. Expectations are that it could fall to 8.2%.

Increasing numbers of households are feeling the pinch due to increased mortgage or rental costs, and much higher food and energy bills – including petrol.

A new Resolution Foundation report shows that total household wealth has fallen by £2.1 trillion over the past year as interest rates have climbed – the biggest fall as a share of GDP since World War II. 

14 July: More Renters Than Homeowners Report Payment Struggle

Renters in Great Britain are more likely to report a rise in living costs than mortgaged homeowners, according to the Office for National Statistics (ONS), writes Bethany Garner.

The latest official cost of living data, pooled between February and May this year, revealed that, of those renting, more than two-in-five (42%) reported a rise in costs over the last six months, compared to 32% of mortgage holders.

This is despite the successive Bank Rate hikes^[16] pushing up the cost of mortgages for borrowers on variable rate deals – and new two-year fixed rate deals reaching average costs^[17] of almost 7%.

The ONS also found that four-in-10 renters (43%) reported finding it ‘very’ or ‘somewhat’ difficult to afford payments, compared with 28% of mortgage holders.  

Paul McGuskin, from pensions consultancy Broadstone, commented: “Today’s data not only reveals that a far higher proportion of renters are struggling to meet their monthly payments but are also significantly more likely to face financial vulnerability.”

Average UK rental prices rose 1.3% in the month to June, according to HomeLet’s Rental Index – and are 10.4% higher than last year.  The average cost of renting a home in the UK has now risen to £1,229 per calendar month. 

Separate research published yesterday^[18] shows that rental increases could have a disproportionate impact on cash-strapped students who face hikes of up to 50% when moving from halls of residence into the private market. 

Around a third of mortgage holders (32%) have also seen housing costs rise in the last six months, said the ONS, with mortgaged landlords likely to be passing rising costs onto tenants.

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5 July: Almost 1 in 5 Cars Registered In June Powered By Battery

New car registrations grew by almost 26% year-on-year in June, marking the 11th consecutive month of growth, according to data from the Society of Motor Manufacturers and Traders (SMMT), writes Candiece Cyrus.

Advocates of electric vehicles are calling on the government to slash VAT on public charging from 20% to 5% so that it matches the rate paid by those who can charge their vehicle at home.

Registrations of battery electric vehicles (BEVs) increased by 39% compared to June 2022 as almost 32,000 private and fleet buyers opted for these zero emission cars. This represents around 18% of monthly total new car registrations of 177,000.

There were 80,000 private car registrations during the month – an increase of 15% year-on-year – while large fleet registrations increased by 38% to around 93,000 units. 

Petrol motors remain the vehicle of choice for many, with over 70,000 registrations – a 13.5% increase on June 2022. Diesel registrations fell by 22% to just 6,000 vehicles. 

Around 21,000 drivers registered a hybrid vehicle (HEV) – up 40% year-on-year and accounting for around 12% of total registrations. These vehicles are powered by an internal combustion engine and electric motor.

Around 13,000 drivers registered a plug-in hybrid (PHEV), accounting for 7% of all June registrations and a year-on-year increase of 66%. PHEVs are HEVs which can be charged from an external source of electricity.

Source. SMMT

Despite electric vehicles (EVs) growing in popularity, experts say more needs to be done to speed up the transition to electric cars in order to meet the government’s zero emission vehicle mandate, which requires 22% of each car manufacturer’s registrations to be BEV registrations by 2024.

Mike Hawes, chief executive of the SMMT, said: “The new car market is growing back and growing green, as the attractions of electric cars become apparent to more drivers. But meeting our climate goals means we have to move even faster. 

“Most electric vehicle owners enjoy the convenience and cost saving of charging at home but those that do not have a driveway or designated parking space must pay four times as much in tax for the same amount of energy. 

“This is unfair and risks delaying greater uptake, so cutting VAT on public EV charging will help make owning an EV fairer and attractive to even more people.”

James Hind, chief executive of online car marketplace carwow, says: “The only way is up, as we see the UK’s new car market lean into its 11th consecutive month of growth.

“While we’re a little way off the 22% battery electric vehicle registration figure needed for the zero emission vehicle mandate, the BEV market share has hit record levels for uptake. Still, there’s room for improvement as we cross the six-month countdown mark.”

3 July: Govt ‘Fuel Finder’ Service To Highlight Low Prices

Drivers were overcharged for fuel to the tune of nearly £1 billion last year, according to new official figures announced alongside plans to force fuel stations to make their prices public.

The UK’s Competition and Markets Authority (CMA) has found drivers have been short-changed by weakened competition at the forecourts since 2019, particularly among supermarkets – although it concedes that these retailers remain the cheapest places to fill up.

The CMA’s research found increased profit margins cost drivers an extra 6p per litre between 2019 and 2022. In 2022 alone, this totalled £900m.

Sarah Cardell, head of the CMA, said: “Competition at the pump is not working as well as it should be and something needs to change swiftly to address this. 

“Drivers buying fuel at supermarkets in 2022 have paid around 6 pence per litre more than they would have done otherwise, due to the four major supermarkets increasing their margins.

“We need to reignite competition among fuel retailers. It needs to be easier for drivers to compare up to date prices so retailers have to compete harder for their business.”

To increase competition and bring prices down, the CMA plans to establish a nationwide ‘fuel finder’ scheme that would allow motorists to find the cheapest fuel locally. 

The government has agreed to bring in legislation that will force retailers to publish their prices to power the service. The CMA estimates that the scheme could save the driver of a typical family car £4.50 per tank-full by driving to stations only five minutes away.

Grant Shapps MP, energy security secretary, said: “Some fuel retailers have been using motorists as cash cows – they jacked up their prices when fuel costs rocketed but failed to pass on savings now costs have fallen.

“Today I’m putting into action the CMA’s recommendations and standing by consumers – we’ll shine a light on rip-off retailers to drive down prices and make sure they’re held to account by putting into law new powers to increase transparency.”

The government will consult on designs for the new scheme in the autumn. In the meantime, the CMA is creating a voluntary scheme encouraging retailers to share and update their fuel prices.

Similar schemes have been successful in Germany and Australia, where drivers were able to save Aus$93 per year using the data.

In its latest report on fuel pricing trends, motoring organisation AA found unleaded petrol prices had fallen from 146.9p per litre at the end of April to 144.7p per litre at the end of May. Diesel prices, meanwhile, dropped from 161.1p per litre to 153.9p per litre.

It found the South East and London were paying the highest prices for petrol and diesel, respectively, while Northern Ireland’s drivers were paying the lowest prices for each.

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28 June: Measures Cover Pricing, Interest Rates And Service

Jeremy Hunt MP, Chancellor of the Exchequer, today chaired a summit meeting with market regulators including the Competition and Markets Authority, Financial Conduct Authority, Ofcom (telecoms), Ofgem (energy) and Ofwat (water).

The government says it wants regulators “to work at pace to guarantee markets are working properly.” 

Mr Hunt argues that, with wholesale energy prices and other costs beginning to fall, consumers should start to see benefits including lower prices and reduced bills. 

The government is also keen to ensure that banks pass on higher interest rates to savers and do not maintain a disproportionately high margin between the rates to charge borrowers and what they pay on savings accounts.

Mr Hunt said: “I am pleased we’ve secured agreement with the regulators to act urgently in areas where consumers need most support to ensure they are treated fairly. Businesses must play their part too and I will keep a watchful eye on the progress they make.”

The Chancellor also agreed a new action plan with the regulators to support consumers, particularly the most vulnerable.

The Financial Conduct Authority has agreed to:

• deliver better deals for savers by driving competition, including reporting by the end of July on how the savings market is supporting savers to benefit from higher interest rates.
• require the largest banks and building societies as part of this to explain the pace and extent of their pass-through of interest rates, and how they are proactively supporting savers to switch to high interest rate products.

The Competition & Markets Authority has agreed to:

• deliver a better deal for motorists by publishing its review of the road fuel market, which examines profit margins in supermarkets and other fuel retailers, next Monday. This will include the impacts on vulnerable consumers.
• help shoppers pay fair prices by bringing forward their update of competition and unit pricing in the grocery sector to earlier in July and laying out next steps. This will include further scrutinising the food supply chain as well as measures to make it easier for consumers to make the best choices.
• provide an update on their housebuilding market study and work in the rented accommodation sector in August.
• scrutinise markets where cost-of-living pressures are growing and launch work in at least two new areas the CMA considers in need of further investigation. It will also update on key developments in its ongoing crackdown on misleading consumer practices.

Telecoms regulator Ofcom has agreed to:

• take action to push suppliers who have yet to introduce social tariffs (discount deals for vulnerable customers) to offer them in the broadband and mobile markets, as well as waive fees for any customers who want to switch providers to access a social tariff.
• push suppliers to take immediate steps to raise awareness of existing social tariffs and drive consumer take-up. Ofcom will work with government and other relevant bodies to support industry efforts.
• publish a report on its current review of in-contract prices to ensure consumers are sufficiently aware of what they are signing up to by the end of the year. This will consider whether Ofcom’s rules need to be strengthened. Ofcom will also publish an update on its full range of work to support consumers in July.

Water regulator Ofwat has agreed to:

• crack down on water companies not going far enough to support customers to pay their bills, access help and repay debts. This will include assessing water company compliance with Ofwat’s Paying Fair Guidelines, and where companies’ approaches are found to be insufficient, setting out clear actions for improvement in July. Next year, Ofwat will also set out clear and binding licence conditions for every water company on how to treat their customers, including customers in vulnerable circumstances.
• hold water companies to account over delivering existing social tariffs for those unable to pay water bills, as well as allowing consumers to apply for payment holidays and offering support to those on low-incomes.
• ensure targeted support for vulnerable customers by improving data sharing, such as those struggling with bills (along with Ofgem).

Energy regulator Ofgem has agreed to:

• ensure all suppliers are passing falling prices onto consumers, keeping the price cap formula under review to ensure that it mirrors the costs facing suppliers. The new lower cap from 1 July will reduce a typical annual household energy bill by £426.
• strengthen protections and support for the vulnerable by mandating the Code of Practice on prepayment meters and ensuring that suppliers are able to offer Additional Support Credit (ASC) to PPM customers in need. Both are subject to Ofgem consultations launched today.
• take action against suppliers that have over-charged business customers and publish its review of the non-domestic market this Summer.
• scrutinise supplier finances as the sector begins to move from loss making back into profit. The regulator and government moved quickly to stem losses and protect consumers when prices were rising sharply and expects suppliers to act responsibly and in the interests of their customers as prices fall and profits return. This includes ensuring they deliver good service standards and support the most vulnerable customers. Those who are not yet meeting new capital requirements should retain profits rather than pay out dividends.

The regulators agreed to provide regular updates to the Treasury on their progress and that a follow up meeting would be held later this Summer. The FCA, Ofcom, Ofwat and Ofgem will also publish a joint statement to set shared expectations on treatment of customers in financial difficulties.

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22 June: Bank Rate’s Upwards Trajectory Triggers Financial Misery

Interest rate rises will add thousands of pounds to mortgage payments when borrowers come to remortgage to a new deal in the coming months, writes Jo Thornhill.

Use our calculator^[19] to work out how much you would repay on your loan at different rates of interest.

Earlier this week the Institute for Fiscal Studies said increases to Bank Rate from 0.1% in December 2021 to 4.5% last month will mean disposable incomes will fall by 20% for around 1.4 million mortgage holders. 

This is because their mortgage payments, when they remortgage in the coming months, will increase, on average by £280 a month. Borrowers aged between 30 and 39 will see increases of £360 a month, on average.

Over a million borrowers on variable rate and tracker mortgages will see their repayments rise almost immediately in the wake of the latest increase in the Bank of England Bank Rate, which was increased today from 4.5% to 5%, its highest since 2008.

The government has so far refused to offer help to mortgage borrowers in the form of a relief package, and instead has called on lenders to take a sympathetic approach and offer assistance to those borrowers who may be struggling. 

This is likely to involve allowing borrowers to switch to an interest-only mortgage or extending the term of the loan to bring down monthly costs.

The impact of rising mortgage rates on borrowers is set to be dramatic, particularly for those who have little extra left in the monthly budget, with energy and food prices also increasing rapidly over the past year.

The following calculations show how much more typical borrowers on 25-year repayment mortgages will be paying at mortgage rates on competitive two-year fixed rate deals.

A borrower with a £150,000 repayment mortgage (with 10% equity in their property) coming to the end of a two-year fixed rate now is likely to have a pay rate of around 2.5% and monthly payments of £673, for example.

If they remortgage to one of the best two-year fixed rates (90% LTV) today at around 5.99% their new monthly payments will be £965 – £292 more. That’s an increased cost of £3,504 in one year.

The same borrower with a £250,000 mortgage (90% LTV) will face new monthly payments that are around £488 higher than before – or £5,856 more per year.

A homeowner with a £300,000 mortgage and 40% equity in their property currently on a two-year fixed rate paying 2.5%, could get a new two-year fix today at around 4.8%. This borrower can access slightly lower fixed rates due to having a bigger portion of equity in their home. 

But rate rises will also mean a big jump in monthly payments for this borrower from around £1,345 now to £1,718 after they remortgage. That’s more than £4,470 extra in payments per year.

Although many banks and building societies have already priced in an increase, average fixed mortgage rates are likely to start to creep up again in the coming days as lenders adjust their pricing to reflect the new Bank Rate.

Karen Noye, mortgage expert at Quilter, says it is a stressful time for millions of borrowers, but that burying your head in the sand is the worst thing to do: “The ultimate impact is there is now a real risk of people falling into arrears. 

“If you are in this position, there is something you can do. Talking to your lender should be your first port of call. It may be able to offer a payment plan, mortgage holiday or even extend the term of your mortgage, which can have a dramatic impact on monthly payments.”

Borrowers should also remember that deferring interest, suspending payments or extending the term of a loan will increase the total amount to be repaid.

20 June: Rent Takes Biggest Slice Of Tenant Income In 10 Years

• UK rental costs rising by 10.4% a year
• Cost of new lets averaging £1,126 – or £928 excluding London
• Average tenant spends more than 28% of their gross pay on rent

The cost of renting a UK home climbed by 10.4% in the 12 months to April – meaning a typical tenant starting a new let must now shell out £1,126 a month, or £928 when stripping out London, writes Laura Howard. 

It marks the 15th consecutive month of double-digit growth, according to Zoopla’s latest Rental Market Report. 

Having outpaced earnings growth for the last 21 months, rental costs now account for an average of 28.3% of a tenants’ pre-tax pay, which compares to 27% over the last 10 years. 

The extra strain on renters’ monthly budgets comes on top of already crippling household bills and food costs, as annual UK inflation remains at 8.7% – more than four times its target.

The Office for National Statistics will update the official inflation number tomorrow (Wednesday), with some expecting it to fall further towards 8%.

Zoopla says that a ‘chronic imbalance between supply and demand’ is responsible for rising rents, as landlords are forced to sell or raise rents in the face of soaring mortgage rates. 

According to Zoopla’s estimations, landlords in London and the south east – where prices are high and rental yields low – account for 51% of landlord sales. 

Rental costs and movement varies significantly across the UK. 

Rents are rising fastest in Edinburgh at a rate of 13.7%. Average monthly costs for a new tenancy in the Scottish capital now stand at £1,130. 

Belfast saw the smallest rise at 4.3%, where tenants pay an average £713 a month.

In London, where the cost of a new tenancy has now just broken the £2,000 threshold (£2,001), average rental inflation stands at 13.5%.

High rental costs are set to continue into the second half of the year as the seasonal summer/ autumn upturn comes into view, according to the property portal. 

However, with little prospect of increased supply of rental homes, the market should show signs of a correction, said Zoopla. It expects rental inflation to slow to around 8% by the end of the year, although the figure is still above wage inflation.

Richard Donnell, executive director at Zoopla, said: “The cost of renting is at its highest for a decade with emerging signs of stress for some renters, especially those on lower incomes. Boosting rental supply is the key policy lever to support a healthier and more sustainable rented sector.”

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13 June: Lending Lowest Since Onset Of Pandemic In 2020

Data published today by the Bank of England and the Financial Conduct Authority shows that mortgage lending is down by 24% compared to a year ago. 

Gross advances in the first quarter of 2023 stood at £58.8 billion, down from £76.9 billion in Q1 of 2022 and £81.7 billion in the previous quarter. Lending is at its the lowest level seen since the start of the pandemic in 2020.

The value of new mortgage lending – loans agreed to be advanced in the coming months – was 16.1% down in the first quarter of this year and 40.7% less than a year ago, at £48.9 billion. This was also the lowest recorded level since the second quarter of 2020. 

The data shows that mortgage arrears have risen as rates and the general cost of living have soared over the past year. The value of outstanding mortgage balances with arrears increased by 9.5% in the first quarter of 2023 and 12.5% over 12 months, to £14.9 billion. 

Jeremy Leaf, north London estate agent, remains positive: “Recent volatility in the mortgage and property markets makes these figures particularly interesting. Although comparisons with the busy period 12 months ago can be misleading, they still show that buyers are proceeding cautiously, despite improvements in activity on the ground since the beginning of the year. 

“Provided mortgage deals are left on the table and interest rates don’t keep rising, then stability will return as the market is still being supported by strong employment numbers and better-than-expected salaries.”You can catch up on the latest mortgage news here^[20].

12 June: Plugging National Insurance Gaps Could Boost Entitlement

Thanks to a near two-year deadline extension announced today, taxpayers have until 5 April 2025 to plug gaps in their National Insurance contribution records from 2006 to 2016, potentially increasing their state pension entitlements, writes Andrew Michael.

The period 2006 and 2016 was a transitional period coinciding with the move from a previous state pension arrangement to the present one. The government originally imposed a deadline of 31 July 2023 for those looking to top-up their contributions for these years.

NICs are a means of taxing earnings and self-employed profits. Paying is a legal obligation, and those who do so also earn the right to receive certain social security benefits.

However, not everyone manages to keep up with a full set of NI payments, often because of a career break, potentially lowering the amount in benefits to which they are entitled.

This includes the amount received under the post-2016 state pension, which currently stands at £203.85 a week.

To make up for this, the government allows people to fill the gaps in their NI history by topping-up missed contributions. Making voluntary contributions can leave individuals significantly better off in retirement than not doing so.

Rates vary for different classes of NIC, payable according to employment/self-employment status. They currently stand at £3.15 per week for Class 2 NICs and £15.85 a week for Class 3.

Britons typically need at least 10 years of NICs to qualify for any kind of retirement payment at all and at least 35 years to receive the maximum state pension amount.

The government said the move means that “people have more time to properly consider whether paying voluntary contributions is right for them and ensures no one need miss out on the possibility of boosting their state pension entitlements.”

But the government added that paying voluntary contributions does not always increase state pension entitlement: “Before starting the process, eligible individuals with gaps in their NI record from April 2006 onwards should check whether they would benefit from filling those gaps”.

Alice Hayne, personal finance analyst at Bestinvest, said: “The good news is that Britons with gaps in their National Insurance record no longer need to panic about running out of time to make up a gap and receive the full pension income they are entitled to. Buying back missed years is a great way to bolster retirement income, and this window of opportunity to backdate contributions all the way to 2006 is something not to be ignored.

“The deadline extension will not only give the government time to catch up on the volume of enquiries, but also allow more taxpayers to find out if they would benefit from making up any missing years. The extra time will also give those that will gain from making up a shortfall the chance to build up funds to cover the cost, which can run into the thousands, depending on how many missing years they have on their record.”

Individuals can check their records by obtaining a state pension forecast^[21]. To check individual NI records, use the government’s personal tax account^[22] website.

7 June: Arrears And Repossessions Also On The Increase

Household budgets continue to face intense pressures, according to industry figures which show mortgage borrowing and personal savings fell in the first three months of 2023 while arrears and home repossessions increased, writes Jo Thornhill.

UK Finance’s Household Finance Review for the first quarter of the year found mortgage lending to first-time buyers and home movers fell to its lowest level since the early months of the Covid 19 pandemic in 2020. 

Excluding those months during lockdown when the housing market was effectively closed, first-time buyer numbers are at their lowest since 2015.

As we reported earlier^[23] this week, the number of first-time buyers opting for a mortgage over 35 years or more (increasing the term of the loan can make it more affordable) is also at a record high, at 19%.

For the first time in 15 years, the savings held by households has contracted year on year with the total value of money on deposit in instant access accounts falling by 4% to £867 billion, compared to £905 billion at the same time last year.

Among households still able to put away cash savings, there has been a revival of longer-term savings products, such as fixed rate bonds and notice accounts. These accounts, which have been unpopular over the past decade due to low interest rates, are now showing increased popularity due to more competitive terms.

The number of borrowers getting into difficulty with their mortgage repayments rose in the first few months of the year following a rise in Q4 of 2022. There were 2,530 new cases of arrears in the first three months of 2023, up from 1,050 in the final quarter of 2022. It brings total arrears cases to 83,760.

Home repossession figures also climbed, albeit from a low base, according to UK Finance. Possessions figures had seen an expected dip in the last quarter of 2022, as the industry paused enforcement activity through the festive season. But the numbers resumed a gradual increase in the early months of this year.

There were 1,250 mortgage possessions recorded in the first three months of 2023, up from 860 in the previous quarter – but up 28% from the 960 possessions seen in the first quarter of 2022.

Eric Leenders at UK Finance, said: “We expect near term mortgage market activity to remain relatively fragile. Borrowers coming to the end of their fixed-rate deal are encouraged to seek advice from a whole-of-market broker.”

Consumer spending (on debit and credit cards), which typically sees a dip in the early months of the year, as households tighten their belts after the festive period, was predictably subdued in the first quarter of the year. But this was partly offset by higher than expected spending on travel and foreign holidays. 

Overall credit card debt is up around 10% year on year.

Sarah Coles, personal finance expert at Hargreaves Lansdown, said: “Our enthusiasm for travel has held up surprisingly well. It seems as though having to stay home during the pandemic has shifted how people see their holidays – so more are classing it as an essential that they can’t do without – no matter how hard it is to afford. 

“For some consumers, they are covering the extra costs with savings, perhaps build up during the pandemic.”

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5 June: Electric Vehicles Boom As Diesels Slump

New car sales to private buyers fell in May, with fleet sales alone helping the industry achieve a tenth consecutive month of growth.

Official figures from the Society of Motor Manufacturers and Traders (SMMT) showed that May’s 65,932 private registrations marked a 0.5% drop compared to the same period last year. 

Meanwhile, the month’s 76,207 new fleet registrations figure was up by more than 20,000 on May 2022.

For the month overall, there were 145,204 registrations, up by around 20,000, or 16.7%, on the same period in 2022.

While registrations improved year on year and reflected a tenth month of growth, they were lower than 2021’s numbers. In fact, discounting the pandemic-stricken May of 2020, registrations were at their lowest since 2011.

The electric vehicle market continues to grow, with Battery Electric Vehicles (BEV) registrations up nearly 60% year-on-year to account for 16.9% of all registrations in May.

Ford’s Puma once again topped the best-sellers table in May, retaining its spot as the most registered vehicle for the year so far.

Source: SMMT

Mike Hawes, SMMT chief executive, said: “After the difficult Covid-constrained supply issues of the last few years, it’s good to see the new car market maintain its upward trend.”

The figures also show a continuing decline in sales of diesel vehicles, down almost a quarter year on year to 5,758.

Hugo Griffiths, automotive expert at carwow, said “With diesel cars now making up a near trace amount of the market, holding just a 4% share, and EVs representing 17% of sales, buyers from all walks are almost unanimous that new cars should be powered by petrol engines, electric batteries and motors, or a hybrid of those two technologies.”

Manufacturer Mercedes Benz last week joined calls to delay the ‘cliff edge’ for new rules that will, from January 2024, impose 10% tariffs on electric vehicle sales into and out of Europe if more than 40% of battery components come from outside either territory.

At the opening of a cell manufacturing plant in northern France, Mercedes chief executive Ola Källenius called for the introduction of the tariffs to be pushed back to 2027.

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26 May: Report Suggests Millions Miss Out On Correct Products

Customers are failing to get the financial products they need when shopping online, according to a report that says up to 13 million ‘vulnerable’ people were affected in the past year, writes Candiece Cyrus.

The market regulator, the Financial Conduct Authority (FCA), defines a vulnerable customer as one who, “due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”.

The Vulnerability Void study from consultants Newton involved around 3,000 consumers, including at least 50 who are vulnerable because of their physical, mental or neurodegenerative conditions. These include learning difficulties, autism, poor sight and Parkinson’s disease. 

The vulnerable sample also included consumers who have difficulties understanding finance or are struggling financially, and those who have experienced moments of vulnerability such as falling ill, or suffering bereavement.

The report estimates that 30 million people in the UK shopped for financial products online in the past year, and that more than 24 million are estimated to be in the ‘vulnerable’ category. Of this group, around 13 million either did not get what they needed or are unsure they did. 

The research suggests that online application processes for financial products fail to account for cognitive fatigue, can ‘raise alarm instead of awareness’ about risks, and use industry jargon. 

It says this leaves vulnerable customers susceptible to falling into debt, being under-insured and using products such as short-term payday loans and prepaid debit cards. These products can incorporate high fees, while the former often charge high interest rates, making it easy to spiral into debt if repayments are missed.

Vulnerable customers who applied for products such as current accounts, savings accounts and insurance were more likely to get what they needed than those who started investing or took out credit. 

Over 60% of vulnerable customers who were looking to start investing were not provided with the product they needed, while 72% of those who had an overdraft approved, 60% of those who took out a loan and 45% of those who took out a credit card, also did not get the product they needed.

Meanwhile, nearly 48% of vulnerable customers who remortgaged felt they weren’t given the product they required. This increased to 67% for vulnerable customers who took out a new mortgage.

Vulnerable customers who did not get what they needed used alternative channels (such as calling the provider or going into a branch), tried another provider or ‘gave up’ trying to get a product.

The FCA is to introduce new Consumer Duty rules from 31 July which stipulate that financial services providers must avoid causing ‘foreseeable harm’, and ‘drive good outcomes’ for their customers, especially those who are vulnerable.

25 May: UK Leads Europe For Stolen Payment Data

There are more stolen payment card details on the dark web from Britain than from any other European country, selling for an average of just £4.61, according to new research.

VPN provider NordVPN says the UK came third behind the US and India for stolen payment data, after analysing six million stolen details being sold illegally on dark web marketplaces.

The VPN provider’s study showed the UK had a total of 164,143 payment card details listed online, which was nearly as many as the next two biggest European victims, Italy and France, combined.

Source: NordVPN

52% of the stolen British data concerned credit cards and 37% related to debit cards. The remainder of the data came from other payment cards.

Almost two thirds (63%) of the stolen UK data also came bundled with other personal information, including addresses, phone numbers, email addresses and National Insurance numbers.

NordVPN cybersecurity expert Adrianus Warmenhoven said: “The card numbers found are just the tip of the iceberg when it comes to payment fraud. This is a crime with a huge ripple effect and the extra information being sold makes it far more dangerous, as a skilled criminal can use these to acquire more personal details.”

Selling for an average of £4.61 per record, the asking price for Brits’ data was 18% cheaper than the global average (£5.61) and half the cost of Denmark data – the most expensive data for sale – at £9.23.

Despite higher-than-average numbers of stolen data, however, UK victims are less at risk than those in other countries, according to NordVPN.

Its Card Fraud Risk Index measures how likely payment information is to be sold with additional identifying data. The UK ranked 22nd place on the index, far behind the highest risk countries: Malta, New Zealand and Australia.

Staying safe online

The VPN provider advises cardholders to protect themselves online by using strong passwords comprised of a mix of upper and lower case letters, numbers and symbols, taking advantage of two factor authentication and keeping an eye out for suspicious transactions on bank and credit card statements. 

If you spot anything you can’t identify, you should contact your card issuer urgently to investigate the unusual activity.

The majority of the data examined by NordVPN was not stolen using brute force techniques – that is, via computer programs that attempt transactions guessing the thousands or even millions of possible combinations of a card number until they successfully guess the correct combination.

Instead, data was harvested in other ways such as phishing – where web users are duped into following links to fraudulent websites and sharing payment details, or malware, where a malicious program which records their online activity is unwittingly downloaded to a user’s device.

To protect against these kinds of scams, you should only make purchases from trustworthy websites – checking carefully any links that led you there and the URL displayed in the address bar to make sure you’re not looking at a lookalike or ‘spoof’ site.

Similarly, you should never download files attached to an email you weren’t expecting, or from a sender you’re unfamiliar with. The same goes with websites, which you should check are genuine and trustworthy before downloading anything.

24 May: Soaring Grocery Costs Mean Checkout Woes Continue

Food prices are continuing to rise at near-record levels, despite the fall in overall consumer price inflation announced today by the Office for National Statistics, writes Jo Thornhill.

As reported in our story^[24], the headline rate of inflation in the year to April fell from 10.1% the previous month to 8.7%. But the rate at which grocery shopping prices are rising – 19.1% – is only marginally down from the 45-year high of 19.2% in March.

Commenting on the figures, the Chancellor, Jeremy Hunt, said food prices remained ‘worryingly high’. 

While lower wholesale energy price rises are helping reduce the main inflation rate, food prices have continued to rise. Inflation for staples including bread, milk, eggs and fresh fruit and vegetables remains stubbornly high.

A basket of 10 household food items, including eggs, milk, cheese, bread, bananas, pasta and tinned fish, now costs an average of £25.60 – £5.76 more than a year ago, according to the Office for National Statistics interactive inflation tool. This represents an annual inflation rate of 29%.

Among some of the biggest annual rises in food costs (all above the 19.1% grocery inflation figure recorded today) are:

• Cucumber: 83p each (+54%)
• Granulated white sugar: £1.08 (+47%)
• Olive oil 500ml-1litre: £5.95 (+46%)
• Broccoli (per kg): £2.38 (+44%)
• Iceberg lettuce: 79p (+41%)
• Baked beans 400g-425g: £1.07 (+41%)
• Cheddar cheese (per kg): £9.42 (+39%)
• Eggs per dozen: £3.29 (+37%)
• Carrots per kg: 66p (32%)
• Self-raising flour 1.5kg: 83p (30%)
• Frozen breaded/battered white fish 400-550g: £5.20 (+30%)
• Butter 250g: £2.34 (+28%)
• White potatoes per kg: 73p (+28%)
• Small yoghurt (single pot): 84p (+26%)
• Dry pasta 500g: £1.06 (+22%)

The ONS Shopping Price Comparison Tool, below, shows how much costs of individual products have risen in the past year.

It is not just food costs that remain extremely high. While the rate of increase in prices for many non-food grocery items is below the overall CPI rate of 8.7%, many are much higher – including in particular household cleaning products and children’s clothing. 

Among some of the biggest annual price rises for non-food products are over-the-counter medicines such as cold and flu drink powder sachets (23%), washing-up liquid (18%), bleach (22%) and kitchen roll (33%), plus children’s clothing including sports trainers (21%) and girls’ coats (15%).

23 May: HMRC Says Three Million Could Get Savings Boost

Up to three million people on low incomes or receiving benefits stand to gain from an extension to the government’s Help to Save scheme, confirmed today, writes Jo Thornhill. 

The scheme was due to end in September this year. But HM Revenue and Customs has confirmed it will continue until April 2025. A consultation, announced in the Budget in March, is looking at ways the scheme can be reformed and improved.

Help to Save is open to those receiving benefits including working tax credit, child tax credit and universal credit. Savers can deposit funds at any time from £1 up to a maximum of £50 a month. 

The savings plans last for four years, with savers receiving a 50% government bonus, with payments paid in the second and fourth years. A saver making the maximum deposit each month would save £2,400 over four years. This would attract the maximum £1,200 bonus.

Deposits can be made by debit card, standing order or bank transfer and there is no limit on withdrawals, although withdrawing funds could affect the overall bonus payment.

Around 360,000 savers have opened an account since the scheme launched in 2018. But HMRC says an additional three million people could benefit as a result of the extension if they chose to participate.

Individuals are eligible to open a Help to Save account if they are receiving:

• Working tax credit
• Child tax credit (and are entitled to working tax credit)
• Universal credit, and they (with their partner, if it is a joint claim) had a minimum take-home pay of £722.45 in their last monthly assessment period.

Even if a saver’s circumstances change after they open the account and they are no longer receiving one of the qualifying benefits, they can continue to save in the account and receive the bonus. Find out more and apply at the government’s site^[25].

18 May: Citizens Advice Calls For More Action On Social Tariffs

A million households gave up their broadband in the last year because they couldn’t afford it, according to new research.

Citizens Advice found people claiming Universal Credit (UC) were worst hit by rising bills, and were six times more likely to give up their broadband access than non-claimants. The charity also found UC recipients were four times more likely to be behind on their broadband bills.

Inflation-linked annual price hikes have seen some telecoms providers put their existing customers’ bills up by as much as 14.4% – typically adding 3 or 4% to the current rate of the consumer price index (CPI) or retail price index (RPI) each April.

Dame Clare Moriarty at Citizens Advice said: “People are being priced out of internet access at a worrying rate. Social tariffs should be the industry’s safety net, but firms’ current approach to providing and promoting them clearly isn’t working. The people losing out as a result are the most likely to disconnect.

“The internet is now an essential part of our lives – vital to managing bills, accessing benefits and staying in touch with loved ones. As providers continue to drag their feet in making social tariffs a success, it’s clear that Ofcom needs to hold firms’ feet to the fire.”

Last month the telecoms industry regulator Ofcom said that 95% of 4.3 million eligible UK households are not signed up for a social tariff. To see a list of the social broadband tariffs currently available, click here^[26].

In January the watchdog also reported concerns about affordability in the sector. The Ofcom Communications Affordability Tracker showed three in 10 households – roughly eight million – reported struggling to pay for their phone, broadband, pay-TV or streaming bills.

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17 May: Regulator Says Almost 6 Million Brits Miss Payments

Around 5.6 million UK adults say they have missed at least three of their last six monthly bill or credit payments, writes Bethany Garner.

This represents an increase of 1.4 million compared with May 2022, according to data from the Financial Conduct Authority (FCA), the UK financial watchdog.

As living expenses continue to rise, the FCA also found that 10.9 million adults are struggling to keep up with bills and credit repayments – up from 7.8 million 12 months earlier.

Financial pressures are having a knock-on effect on mental health, with almost half UK adults (28.4 million) saying they felt more anxious in January 2023 than they did six months earlier, due to rising living costs. 

With millions of individuals forced to skip monthly payments, the FCA is urging anyone struggling to afford bills or credit payments to get in touch with their provider as soon as possible.

The watchdog is also clamping down on lenders that do not offer customers appropriate support. The FCA recently told 32 lenders to change the way they treat customers, and secured £29 million in compensation for 80,000 borrowers.

Laura Suter, head of personal finance at AJ Bell, said: “While lenders are being urged to be supportive and lenient with customers, the nation faces a ticking time-bomb of defaults, whether that’s on mortgages, debt or council tax.

“Anyone struggling with repayments needs to face the issue head on. They should approach their lender to at least find out their options and weigh up which might work best for them. If they want an independent opinion they could speak to a charity such as Citizens Advice.”

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16 May: Embattled Savers Withdraw £53Bn In Year To April

As the cost of living crisis drags on, almost a third of UK adults have dipped into their savings to make ends meet, collectively withdrawing more than £53 billion, writes Bethany Garner.^[27]

In the 12 months to April 2023, 29% of UK adults say they used savings to keep up with living costs, according to a study commissioned by life insurance broker LifeSearch (conducted by the Centre for Economics and Business Research (Cebr)).

The study, which surveyed 3,006 UK adults, found that 52% think they are in a worse financial position today than they were a year ago.

The study found that, in the coming months, respondents expect to become £232 worse off per month on average. 

This pressure is largely down to the rising cost of everyday essentials, such as fuel and groceries. According to the Competition and Markets Authority (CMA), the increases are not solely driven by external factors.

Retail profit margins on petrol and diesel, for instance, have increased over the last four years. According to CMA analysis, average supermarket pump prices are five pence per litre higher than they would have been if average margins remained at 2019 levels.

Sarah Cardell, chief executive of the CMA, said: “Although much of the pressure on pump prices is down to global factors including Russia’s invasion of Ukraine, we have found evidence that suggests weakening retail competition is contributing to higher prices for drivers at the pumps.”

Mixed responses

While the majority of adults feel financially worse off than they did last year, 15% of respondents said they feel better off, and 33% said they feel about the same. 

Adults aged 55 and over were the most likely to say they’re financially worse off, with 57% feeling worse off now than 12 months ago.

Younger adults were comparatively optimistic – just 41% of 18 to 34 year olds said they felt worse off now than this time last year, and 23% felt better off. 

That’s despite the fact that this age group predicts they’ll be £367 worse off each month on average. 

Nina Skero, chief executive at Cebr, said: “The latest edition of the Health, Wealth and Happiness Index shows that 2022/23 was a tough period for households. We expect pressure to persist in the coming year, especially in terms of inflation and spending power.

“Nevertheless, the outlook is somewhat rosier than was the case at the turn of the year, with consumers showing considerable resilience in the face of troublesome economic conditions.”

Dipping into savings isn’t the only action individuals are taking to make ends meet. 

Over half of respondents (55%) told LifeSearch they have been using the heating less frequently to save money, while a further 25% have reduced their usage of household appliances, and 11% have delayed a large purchase, such as a car.

Adults aged 55 and over were more likely to cut back on heating than other age groups, with 62% saying they had done so in the last 12 months. 

Elsewhere, 11% of adults have reviewed home^[28] and car insurance^[29] policies in search of a cheaper deal, and 25% have sold items they no longer want or need.

A significant portion of respondents – 17% – admitted to cooking fewer hot meals to cut costs, and 3% said they had turned to a food bank in the last 12 months. 

Around one in three (30%) adults expect this financial strain to have a negative impact on their mental health.

Borrowing and credit

For some, however, cutting back on daily expenses isn’t enough.  

Just under one in 10 adults (8%) say they have borrowed from friends and family to get by in the past 12 months, while a further 11% have taken out new unsecured credit. 

Women were slightly more likely to have borrowed from friends and family, with 10% of women having taken this step versus 7% of men. 

A further 5% of adults aged 34 and under said they were gambling more in a bid to increase their income. 

Emma Walker at LifeSearch, said: “After the record lows we saw in the Index at the height of the pandemic, we experienced some optimism last year when we saw some green shoots of recovery as the Index rebounded. 

“But that was short-lived as the cost-of-living crisis has dragged the Index back down close to pandemic levels again.”

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9 May: Knock-On Effect Of Closures Will Force Prices Higher

The Federation of Small Businesses (FSB) is calling on energy firms to offer small businesses tariffs that reflect today’s wholesale energy prices, as it says hundreds of thousands of companies are trapped in fixed deals based on prices which soared in the last half of 2022, writes Candiece Cyrus.

It says failure to alleviate business expenses will feed through to higher household bills and result in business failures.

More than 700,000 small firms fixed their energy contracts between 1 July and 31 December last year, and 13% of this group (93,000) are now faced with needing to downsize, restructure or close due to not being able to keep up with their energy costs, says the FSB.

This follows a cut in government support to businesses last month, as the Energy Bill Relief Scheme was replaced with the Energy Bills Discount Scheme (see 30 March update).

The FSB says that businesses have now reverted back to paying the peak prices they were charged last year, which could be three or four times more than they paid when the Relief Scheme was in place.

Around 42% of all the firms that fixed contracts in the latter part of last year say it has been impossible for them to pass on costs to customers, who are already struggling with soaring prices.

The FSB’s data shows a large proportion of the struggling firms are from the accommodation and food sector (28%) and the wholesale and retail sector (20%).

It is calling on energy firms to automatically allow small firms the option to extend their fixed contracts at a rate between their original fixed rate and the current, lower wholesale rate.

Tina McKenzie at FSB said: “It’s disheartening to see a significant proportion of small firms could be forced to close, downsize or radically restructure their businesses just when we look to grow our economy. Our community shrank by 500,000 small businesses over the two years of COVID; we shouldn’t now be adding any more to that gruesome tally.

“The least energy suppliers should do is to allow small businesses who signed up to fixed tariffs last year to ‘blend and extend’ their energy contracts, so that their bills are closer to current market rates. We’d also like to see the Government and Ofgem support this initiative.”

May 5: Rocketing Repair Costs Adding To Cost Of Cover

The average price of a used car reached £17,843 in April, according to the Auto Trader Retail Price Index, with an inevitable knock-on effect on insurance premiums, writes Mark Hooson.

The increase in car prices equates to a near 3% jump in a year, but average prices shot up by 1.5% from March.

April marked the 37th consecutive month of year-on-year price rises, but not all vehicle types are going up in value.

Average prices of used electric vehicles (EVs) in April this year were 18.1% lower than in April 2022, at £31,517. Last month also marked the fourth consecutive month in which average EV prices fell.

Auto Trader’s Richard Walker, said: “The used car market has had a strong year so far. Rising used car values have done little to dampen demand and, based on what we’re tracking across the market, there’s no indication of it slowing significantly anytime soon.” 

With car insurance premiums dictated, in part, by the value of a vehicle and the cost of parts and repairs, the rising average price of a used car is having a knock-on effect.

Data from the Association of British Insurers (ABI) in February showed average premiums were up 8% to £470 in the fourth quarter of 2022.

As part of its research, the ABI said its members – over 90% of the UK insurance industry – blamed higher paint and material costs, up by nearly 16%. 

It says 40% of all repair work is affected by parts delays, and that the average price of second-hand cars increased by 19% in the year ending July 2022.

Jonathan Fong at the ABI said: “Every motorist wants the best insurance deal, especially when coping with cost of living pressures, and insurers continue to do all they can to keep motor insurance as competitively priced as possible. 

“Yet, like many other sectors, insurers continue to face higher costs, such as more expensive raw materials, which are becoming increasingly challenging to absorb.”

4 May: Tariff Change Casts Shadow Over EV Manufacturing In UK

Uptake of electric vehicles (EVs) continues to gather pace as the UK approaches a ‘cliff edge’ for tariffs on vehicles sold into Europe.

The latest data from the Society of Motor Manufacturers and Traders (SMMT) represents the ninth consecutive month of growth in the new car market, with EVs now making up roughly one in six (15%) new registrations.

New vehicle sales were up 11.6% in April at around 132,000 registrations. This is the best April since 2021 but much lower than registration levels pre-pandemic. By comparison, April 2019 registrations were around 17% higher.

Battery electric vehicles (BEV) registrations were up by more than half (59.1%) in April, at 20,522 units. Plug-in hybrid vehicles (PHEVs) were up 33.3% at 8,595 registrations. Hybrid electric vehicles (HEVs) were up 7.7% to 15,026 registrations.

The SMMT has revised its predictions upward for the quarter, anticipating higher-than-expected registrations as a result of lower pressure on supply chains. This is the first time it has done so since 2021.

‘Country of origin’ changes

Meanwhile, a forthcoming change in the UK’s trading relationship with Europe could have an impact on EV registrations unless a new agreement is reached.

As it stands under the UK-EU Trade and Cooperation Agreement (TCA), the UK can sell EVs into Europe without having to pay tariffs as long as no more than 70% of an electric battery’s components come from outside the UK. From the beginning of 2024, however, the threshold will drop to 40%.

At that point, any vehicle with a battery comprised of more than 40% imported components will attract a 10% levy when sold into Europe. This could deter manufacturers from setting up or remaining in the UK.

While the change is eight months away, fulfilling orders in time for sale in the EU next year will start well ahead of that time, creating uncertainty for manufacturers about whether the agreement can be amended in the meantime.

In February the Department for Business and Trade said: “We are aware that some members of UK and EU industry are concerned about the 2024 rules and we continue to work closely with industry to understand and mitigate the impact of external factors, such as the Covid-19 pandemic and the global semiconductor chip shortage on the production of electric vehicles and batteries.”

Hugo Griffiths, spokesperson at Carwow, said: “There are issues around sourcing EV battery components, sure, and both the EU and UK are way behind other nations’ battery-production capabilities, and this needs addressing.

“But insisting that from next year only 40%, rather than 70%, of an EV’s battery components can come from outside the UK or EU before additional trade tariffs kick in is a purely synthetic, legislative problem: it has been concocted by policymakers, so it must be solved by them on behalf of the populations they represent.”

4 May: £1.6bn Added To Household Debt

Consumers borrowed £1.6 billion in March, up from £1.3 billion 12 months ago, according to fresh data from the Bank of England, writes Jo Thornhill.

The figure is also up on the £1.5 billion reported in February, making it the six monthly increase in a row.

Borrowing in March was split between £700 million on credit cards and £900 million on other forms of consumer credit, such as car dealership finance and personal loans.

The cost of credit card borrowing edged higher, increasing by 0.18 percentage points to its highest ever level at 20.29%.

Interest rates on bank overdraft borrowing fell by 0.27 percentage points, according to the report, to stand at 21.07%. The rate on new personal loans fell by 0.36 percentage points to 7.79%.

Mortgage approvals for house purchase rose significantly in March, according to the Bank data, reaching 52,000, up from 44,100 in February. However, the figures remain subdued compared to the levels seen in March 2022, when mortgage approvals were recorded at 70,700.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: ‘We regard mortgage approvals as a very useful indicator of future direction of travel for the housing market. 

“Lending was in the doldrums, reflecting the quiet period between the mini-Budget and the end of last year, whereas the approvals figures illustrate that stabilising mortgage rates and inflation is prompting an increase in activity.”

The Bank says households withdrew £4.8 billion from banks and building societies in March. Net deposits into interest-bearing easy access accounts fell significantly, but £6.5 billion was paid into notice accounts. 

In addition, during March, households deposited £3.5 billion into National Savings and Investment (NS&I) accounts. This is the highest net flow into NS&I since September 2022, when the figure was £5 billion.

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3 May: Consumers Told To Assume Any Contact Is A Scam

The government announced today that all cold calls offering financial products will be banned to protect consumers from scams, writes Bethany Garner.

While cold calls relating to pensions have been banned since 2019, the new rules will apply to all financial products – including investments, insurance and cryptocurrency. 

According to government estimates, fraud accounts for 40% of crime in the UK and costs individuals around £7 billion each year. 

Once the new rules come into effect, consumers can automatically assume that any unsolicited calls about financial products are scams.

The new rules will also ban ‘Sim farms’ – where fraudsters send scam text messages to thousands of people at once – and prevent scammers from impersonating the phone numbers of legitimate banks and other businesses. 

At the same time, a new National Fraud Squad is to be created, led by the National Crime Agency and City of London Police. The squad’s 500 members will work with the international intelligence community to identify and disrupt potential scams, the government says.

Funding to the tune of £30 million will also be funnelled into a new fraud reporting centre,  which will be operating “within a year” and which will work with tech companies to make reporting online fraud easier. 

Tom Selby, head of retirement policy at AJ Bell, said: “Financial scams are a scourge on society and ruin lives, so any move to protect more consumers from different types of fraud is extremely welcome.” 

“For this cold-calling crackdown to work we need two things: tightly worded legislation, to ensure nefarious contacts are specifically targeted, and a legitimate threat of enforcement where someone breaks the new rules.

“The plans also need to go hand-in-hand with greater responsibility being taken by internet giants like Google for paid-for scam adverts, something which the Online Safety Bill can hopefully bring into UK legislation.”

While these plans are widely welcomed, the government has faced criticism for not acting sooner.

Rocio Concha at consumer group Which? said: “The fight against fraud has progressed far too slowly in recent years and in particular more action is needed to guarantee that big tech platforms take serious action against fraud.” 

Mr Selby also warns consumers to remain vigilant: “It is vital, regardless of what the government does, that Brits keep their wits about them and are cautious when they are contacted out of the blue by someone they don’t know about their finances.” 

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2 May: Spring Discounts Barely Dent Annual Price Increases

The soaring cost of shop prices appears to have peaked but food is continuing to get more expensive, according to figures out today from the British Retail Consortium (BRC), writes Laura Howard. 

It says annual shop price inflation slowed to 8.8% in April, edging down from 8.9% in March. But shop-bought food costs continued to climb in April, with annual inflation for this category rising to 15.7% from 15% in March. 

The cost of fresh food and ambient food, which can be stored at room temperature, continued to accelerate in the 12 months to April by 17.8% and 12.9% respectively (17% and 12.5% in March).

The BRC said cost pressures throughout the supply chain, more expensive ready meals due to higher packaging costs and the high price of coffee beans were primary drivers behind the food prices rise.

Experts say the overall shop price plateau is due to heavy ‘Spring discounts’ in the clothing, footwear and furniture sectors.

Non-food inflation fell to 5.5% in April, down from 5.9% in March. While the figure remains elevated, it is below the three-month average rate of 5.6%, said the BRC. Inflation for other food categories is above the three-month average.

Helen Dickinson, chief executive of the BRC, said: “We should start to see food prices come down in the coming months as the cuts to wholesale prices and other cost pressures filter through.”

The official UK inflation figure, as measured by the Office for National Statistics’ Consumer Price Index (CPI), eased from 10.4% to 10.1% in the year to March 2023, but is still more than five times the Bank of England’s target of 2%.

14 April: Drivers Obliged To Concentrate As If Driving Normally

Ford has become the first car manufacturer to offer hands-free driving in Europe with the introduction of ‘BlueCruise’ technology in its 2023 Ford Mustang Mach-E electric vehicles (EVs), writes Candiece Cyrus.

With the vast majority of road traffic accidents deemed to be the result of human error, it is hoped the introduction of increasingly sophisticated autonomous vehicles will improve safety statistics, which in turn may result in a general reduction in car insurance^[30] premiums.

Drivers of the Ford Mustang Mach-E model, which costs from £50,830, can use what the manufacturer calls ‘hands-off, eyes-on’ technology. It has been government-approved for driving on 2,300 miles (3,700km) of motorways in England, Scotland and Wales, which have been designated as ‘Blue Zones’.

The first 90 days’ use of BlueCruise is included with the purchase of the vehicle. After this, drivers can subscribe to use it for £17.99 a month.

The ‘Level 2 hands-free advanced driver assistance system’ builds on Level 1 cruise control technology, which is available as standard in an increasing number of cars and sets a vehicle’s accelerator at a specific speed, allowing the driver to take their foot off the pedal. 

There are six levels of driving autonomy in total. Level 0 provides no automation, while Level 3, the step beyond this Ford initiative, provides conditional automation, which includes features such as a traffic jam chauffeur. 

Level 4, high automation, includes vehicles where a wheel and pedals are not installed, such as a driverless taxi, while Level 5, full automation, offers the same features as Level 4, but everywhere and in all conditions. Both 4 and 5 do not require any form of manual driving.

BlueCruise uses cameras and radars to monitor the environment, including traffic, road markings, speed signs and the position and speed of other vehicles, to allow drivers to take their hands off the steering wheel.

An infrared driver-facing camera is also used to check the driver’s attentiveness, by monitoring their gaze, even when wearing sunglasses, as well as the position of their head. 

If the system detects a lapse in the driver’s attention, it will display warning messages. This is followed by audible alerts, activation of the brakes and finally slowing the vehicle down while controlling steering. Similar actions will take place if the driver does not place their hands on the steering wheel on leaving a Blue Zone.

Ford has already introduced the technology in its own–branded and luxury Lincoln-branded vehicles, in the US and Canada, where it has been used across 64 million miles (102 million km), during an 18-month period. During this time, there have been no reported linked incidents or accidents, according to Ford.

The firm intends to roll out the technology across other European countries and other Ford vehicles.

Jesse Norman, transport minister, said: “The latest advanced driver assistance systems make driving smoother and easier, but they can also help make roads safer by reducing scope for driver error.”

The introduction of hands-free technology in driving is part of the larger goal of ultimately producing fully autonomous vehicles. It is thought that such technology could reduce the number of accidents on the roads and in turn car insurance costs, with the potential to save up to 1,500 lives a year. Currently, nine out of 10 accidents on the road are a result of human error.

However, car insurance is still a necessity even when driving a car that uses automated driving technology. It can cover theft of the vehicle, as well as accidents where the driver or the automated system is at fault.

Drivers will need to be able to take control of the vehicle if necessary. Falling asleep and crashing the car, for example, would put them at fault. 

If someone is injured or their property damaged as a result of an accident with a driverless car, they could claim in the usual way against the insurer of the vehicle. The insurer then may choose to pursue its own claim against the vehicle manufacturer if it believes the autonomous driving technology is to blame.Drivers can find a map of the Blue Zones on the Ford website^[31].

5 April: Electric Vehicle Registrations Hit Record Monthly High

The number of battery electric vehicles (BEVs) registered in the UK in March reached a record monthly high of over 46,600 – up 18.6% from around 39,300 in March last year, according to the Society of Motor Manufacturers and Traders (SMMT), writes Candiece Cyrus.

However, the overall BEV market share remained almost the same as last year at a little over 16%. 

Overall, new car registrations rose year-on-year by 18.2% last month – the highest level recorded by the SMMT in a ‘new plate month’ since before the pandemic. Year-related registration plates are released in March and September.

As supply chain issues eased coming out of the pandemic, March marked the eighth consecutive month of growth in the car market, with almost 288,000 units delivered compared to around 243,400 last year. The first three months of 2023 were the strongest for the market since 2019, with just under 500,000 new cars registered. 

Plug-in hybrid (PHEV) registrations rose by 11.8%, from just over 16,000 registrations last year to almost 18,000 this year. Plug-in registrations overall – the total of BEV and PHEV registrations – comprised 22.4% of the market – a slight fall on last year. 

This follows the closure of the government’s plug-in car grant scheme in June last year.

Hybrid (HEV) registrations fared better, rising by 34.3% from around 27,700 last year to around 37,200 this year – its largest year-on-year growth – helping electric vehicles account for more than 33.3% of car registrations last month. 

Hybrids use both battery and internal combustion engine powertrains.

Source: SMMT

Year-to-date in 2023, BEVs accounted for over 76,000 sales compared to over 64,100 in the period between January and March 2022, showing growth of 18.8%. PHEVs accounted for over 31,700 sales, and HEVs over 65,800 sales, seeing growth of 6.7% and 36.9% respectively compared to January and March last year.

The Tesla Model Y – a BEV – was the most popular car model in March, with 8,123 sold, followed by the Nissan Juke (7,532) and the Nissan Qashqai (6,755).

With the publication of the government’s consultation on a Zero Emission Vehicle Mandate last week, the SMMT said: “The market will have to move more rapidly to battery electric and other zero tailpipe emission cars and vans. 

“Models are coming to market in greater numbers, but consumers will only make the switch if they have the confidence they can charge whenever and wherever they need. 

“Success of the mandate, therefore, will be dependent not just on product availability but on infrastructure providers investing in the public charging network across the UK.”

Mike Hawes, the SMMT’s chief executive, said: “March’s new plate month usually sets the tone for the year so this performance will give the industry and consumers greater confidence. 

“With eight consecutive months of growth, the automotive industry is recovering, bucking wider trends and supporting economic growth. The best month ever for zero emission vehicles is reflective of increased consumer choice and improved availability but if EV market ambitions – and regulation – are to be met, infrastructure investment must catch up.

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28 March: Fruit And Vegetables Drive Soaring Food Costs

Rocketing food and drink prices have pushed shop price inflation to a record high, according to figures from the British Retail Consortium (BRC), writes Jo Thornhill.

Annual food inflation was recorded at 15% in March –  up from 14.5% in February. It is the highest level seen since the BRC started collecting the data for its Shop Price Index in 2005. 

The index is a measure of the cost of 500 of the most commonly bought items – including food, drink and non food goods, such as clothing and electrical appliances.

Non-food price inflation rose from 5.3% to 5.7% for the same period and overall shop price inflation rose to 8.9% – up from 8.4% in February and marking a record high. 

The steepest price rises were seen in fresh foods, such as fruit and vegetables, driven by shortages and supply issues. Inflation for prices of fresh food rose 0.7 percentage points in March to 17%.

Helen Dickinson OBE, chief executive at the British Retail Consortium, said: “Shop price inflation has yet to peak. As Easter approaches, the rising cost of sugar coupled with high manufacturing costs left some customers with a sour taste, as price rises for chocolate, sweets and fizzy drinks increased in March. 

“Fruit and vegetable prices also rose as poor harvests in Europe and North Africa worsened availability, and imports became more expensive due to the weakening pound. Some sweeter deals were available in non-food, as retailers offered discounts on home entertainment goods and electrical appliances.

“Food price rises will likely ease in the coming months, particularly as we enter the UK growing season, but wider inflation is expected to remain high.”

It follows the shock rise in inflation recorded by the Office for National Statistics (ONS) earlier this month. Experts were expecting the rate to start easing downwards. But the Consumer Price Index (CPI) rose to 10.4% in the 12 months February – up from 10.1% in the previous month. 

The ONS said the price of food and non-alcoholic drinks rose at their fastest rate in 45 years over this period, with the largest contributor to the increases being fresh vegetables.

Laura Suter, head of personal finance at AJ Bell, said: “Food costs keep going up and up, much to the dismay of the British public, who had hoped the bill at the checkout would have dropped by now. 

“We’re still seeing the impact of high energy prices and the war in Ukraine coming through into food prices, as well as more specific supply issues, like the shortage of salad items or eggs recently. All of these are pushing up costs, particularly for a lot of staple items. It now looks like we’re going to have a more expensive Easter, as sugar prices have pushed up the cost of Easter treats.”

Ms Suter added that those hit hardest are low income families, who spend more of their overall income on food.

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27 March: 95% See Real-Terms Pay Cut Over 12 Months

Almost half of households (47%) say they are concerned about paying their mortgage or rent in the coming year, according to new data from financial services provider Legal & General, writes Jo Thornhill.

The findings, from its Rebuilding Britain Index survey of 20,000 households, also show that 95% have experienced a real-terms pay cut over the last 12 months due to soaring inflation.

The lowest income groups – those with a household annual income of less than £20,000 – are most likely to feel that their quality of life is declining at 29%, compared to 13% in the highest income households.

More than half of respondents to the survey said they had reduced day-to-day expenditure in response to rising inflation and costs. And 51% said they expect their spending to have to decrease even further over the next 12 months.

Inflation, which was recorded at 10.4%^[32] last week (an increase from 10.1% in January), is widening the gap between the wealthiest and poorest households, according to L&G’s survey. It found that one in five households have experienced a decline in income, with lower income communities hit the hardest.

As part of the survey L&G asked respondents what long-term solutions might best tackle the cost of living crisis, with investment in energy-efficient homes and offices (59%) and the creation of higher wage employment (52%) proving the most popular.

24 March: Four-In-10 Use Cards To Bridge Gap To Payday

New research from Nationwide Building Society has revealed that almost four-in-10 (38%) consumers have used credit cards in the last six months to tide them over until payday or benefits payment, writes Laura Howard.

The poll of more than 2,000 people across the country also revealed that almost two thirds (63%) are worried about the state of their personal finances and their ability to cover essential costs. However, the figure is down from the 70% reported last month.

Supermarket groceries (29%), eating and drinking out (14%), fuel/electric car charging (13%), utilities (12%) and holidays and travel (11%) were the main spending areas being plugged by credit cards.

Nationwide’s Spending Report, published alongside the research which collects data from 208 million debit card, credit card and direct debit transactions, showed that essential spending was 12% higher in February than 12 months before, at £3.97 billion. 

Nationwide defines essential spending as utility bills, supermarkets, credit card repayments and childcare costs.

Non-essential spending, which includes holidays, eating out and subscriptions, was up by 9% year-on-year at a total of £2.75 billion.

TV subscriptions are the first cost to be culled, with nearly a quarter (23%) of people reporting they have already reduced or cancelled TV subscriptions, with a further 14% considering doing so. 

Mark Nalder at Nationwide said: “Despite rising costs, households are clearly looking to strike the balance between being fiscally responsible and still being able to spend money on themselves.

“However, our research shows that, while the number of people worried about their finances has fallen slightly, there are people relying on credit as a way of bridging the gap for essential bills.”

Rising living costs are showing no signs of abating, with the latest annual inflation rate in the year to February at 10.4% – up from 10.1% in January and higher than the 9.9% many analysts had been predicting.

Yesterday the Bank of England also raised interest rates^[33] from 4% to 4.25%, potentially affecting the cost of mortgages and other consumer borrowing.

15 March: Chancellor Says Inflation To Be 2.9% By Year-End

Today’s Budget offered a buoyant assessment of the UK economy’s prospects while acknowledging the financial distress being suffered by millions of households in the cost of living crisis^[34].

The Chancellor, Jeremy Hunt MP, says UK inflation will fall from its present level of 10.1% to 2.9% by the end of the year. He also said that the UK will avoid falling into a technical recession in 2023.

He said the government has spent £94 billion in providing cost-of-living support – the equivalent of £3,300 for every household.

He announced sweeping reforms to pensions and extended the provision of subsidised and government-funded childcare for parents looking to enter the workplace or increase their employment hours.

The Energy Price Guarantee^[35], which was due to rise from £2,500 to £3,000 on 1 April, will remain at its current level until the end of June, and the price differential which makes prepayment meters more expensive than credit meters will be removed.

This will save average consumption prepayment customers around £45 a year when it comes into effect later this year.

The UK’s nuclear industry^[36] will be expanded, with the aim of reaching 25% of electricity production being nuclear by 2050.

There was no announcement of increased support for commercial energy users beyond the Energy Bills Discount Scheme, which runs from

Mr Hunt announced a series of corporation tax reliefs to reward businesses that invest in their operations, and unveiled proposals for 12 investment zones across the UK. There will also be significant investment in the artificial intelligence sector^[37].

Here’s a look at the main points from the Budget.

Energy bills

The Energy Price Guarantee (EPG) will be kept at an average of £2,500 until the end of June. It was scheduled to rise to £3,000 on 1 April.

Mr Hunt also said that the so-called prepayment premium is to be eliminated, meaning prepayment customers will effectively be charged on the same terms as those with credit meters. At present they pay more because of the higher cost of running prepayment infrastructure.

The EPG will remain in operation while it remains lower than the price cap operated by Ofgem, the market regulator. The cap, which is reviewed quarterly, rose to £4,279 in Janaury and will be set at £3,280 on 1 April. 

However, the cap is forecast to fall to £2,013 in July, at which point suppliers will be required to offer tariffs that conform with the cap, rather than the EPG.

If wholesale prices continue to fall, we may see the re-emergence of competition between suppliers, with keenly priced tariffs being used to encourage customers to switch between firms – a market phenomenon that hasn’t functioned for 18 months.

The EPG will remain in place until the end of March 2024, rising to £3,000 on 1 July. It will come into play once more if the Ofgem cap rises above this figure due to increases in wholesale prices.

Industry analyst Cornwall Insight predicts it will reach £2,002 in the fourth quarter of 2023.

Childcare

A scheme offering 30 hours of free childcare for working families with three and four year-olds is being expanded to cover those with children aged 9 months and older.

The Chancellor hopes to boost the economy with the expansion of the scheme in England by encouraging more parents and caregivers into work. Equivalent expansion in Wales, Scotland and Northern Ireland is expected to follow.

The 30 hours’ free childcare scheme was introduced in September 2017, covering registered nurseries, childminders and nannies, registered after-school clubs and play schemes and home care workers from a registered home care agency.

Both parents (or a child’s sole parent) must work at least an average of 16 hours per week on the National Living Wage to qualify for the support, leaving some low-income families (for example, where one parent is in full-time education) ineligible.

To support families struggling to access the offer because of the initial outlay, the government will pay upfront childcare costs of up to £951 for one child and £1,630 for two.

Critics say the funding won’t fully cover providers’ costs, that there already aren’t enough nursery places available to meet demand, and that expansion could create safety issues by forcing providers to relax the ratio of carers per child.

In his speech, Mr Hunt said providers would be permitted to increase the ratio of carers to children from 1:4 to 1:5.

The expanded free childcare offer will be rolled out gradually from April 2024, starting with 15 hours’ free childcare for two-year-olds, followed by 15 hours for children aged 9 months to three years in September 2024.

All under 5’s will be eligible for 30 hours’ free childcare by September 2025.

Welfare

Universal Credit (UC) claimants will have to work more hours each week in order to avoid having to meet with Department of Work and Pensions (DWP) ‘Work Coaches’. 

The Administrative Earnings Threshold (AET), which reflects the minimum a claimant is expected to earn from work in order to keep receiving UC, is being increased. 

Previously, the threshold for individuals was set at £617 for individuals and at £988 for couples. These thresholds were the equivalent of a single person working 15 hours per week at National Living Wage (NLW) or 24 hours for a couple.

The new thresholds are equivalent to 18 hours at NLW for a single person. Claimants who fail to make up the hours will risk having their UC payments cut.

Elsewhere, the Chancellor also announced reforms to disability benefits with Universal Support – a voluntary scheme in England and Wales to help people with disabilities find work worth £4,000 per person.

Fuel duty

Drivers will be pleased to hear that the 5p-per-litre fuel duty discount, introduced in March 2022, will remain in place for a further 12 months.

This discount will save motorists around £100 a year, the Chancellor said. 

A further £200 million will also be made available for pot-hole repairs in 2024, in addition to the current budget of £500 million.

Kevin Pratt, Forbes Advisor UK editor, said: “Motorists will be relieved that the government is freezing fuel duty and maintaining the 5p-per-litre fuel duty cut, which was due to end next month, for another year. But they’ll also be happy to see an official acknowledgement of the shocking state of Britain’s roads, with an addition £200 million of funding to tackle the scourge of potholes.

“This is nowhere near enough – billions is needed to fix the nation’s potholes sufficiently well they they don’t simply reappear in a few weeks – but it is better than nothing.

“In many areas, driving is the equivalent of slaloming down the road trying to stay out of the worst divots, with expensive repair bills lying in wait for those who fall victim. More needs to be done to help beleaguered drivers.”

Hugo Griffiths at Carwow said: “In the grand scheme of things the Government is clearly lacking ideas in a number of key strategic areas [regarding driving].

“To name but a few: we are still being kept in the dark with regard to how fuel duty will be replaced once electric cars are mandated. There is also little clarity on how EVs will be made affordable for private buyers as we edge ever closer to 2030.

“The £200 million pothole fund is likely to be yet another sticking plaster for the country’s road network, which needs comprehensive, fundamental attention.

“All things considered, Jeremy Hunt’s Budget is thin gruel that will sustain motorists for a while, but drivers need substance and clarity that are sorely lacking.”

Jeremy Hunt delivered his first full Budget, calling it an agenda for “prosperity with purpose”

Pensions

The Chancellor surprised the pensions industry by significantly altering the total amount of money workers can put into their pensions before being hit with a hefty tax bill.

Mr Hunt is abolishing the pensions ‘lifetime allowance’ (LTA), which currently stands at £1,073,100, from April next year. He is raising the cap on tax-free annual pension contributions – the ‘annual allowance’ – from £40,000 to £60,000. 

The Chancellor also increased the money purchase annual allowance, or MPAA, from £4,000 to £10,000. The MPAA is a special restriction on the amount you can pay into a pension and still receive tax relief.

There is no limit on the value of pension savings that can be built up by an individual, but if the LTA is exceeded, the balance is subject to a charge known as the ‘lifetime allowance charge’.

Workers who have accrued pension pots in excess of the allowance face an extra 25% levy – on top of income tax – when they take the money above that level as income, or are liable for a 55% tax charge if they withdraw money as a lump sum.

Part of the thinking behind today’s announcements is to deter workers – including well-paid hospital consultants – from reducing the hours they work or retiring early to swerve punitive taxation levels in relation to their pension arrangements.

Lily Megson of My Pension Expert, said: “Abolishing the lifetime allowance is eye-catching – but it only affects the most affluent earners. Indeed, in the year leading up to April 2020, only 42,350 breached the allowance.”

Commenting on the increase to the annual allowance, Dean Butler at Standard Life said: “Only a small number of earners will ever reach the current annual allowance of £40,000, but the benefits of today’s increase will be a particular help to those who are looking to catch up with their savings later in their careers.” 

With regard to the hike in the money purchase annual allowance, Mr Butler said: “This is one of the few areas of the pension system where there was near universal agreement on the need for change.

“At a time when the government is hoping to encourage retirees back to work, this is arguably the biggest lever they could have pulled from a pensions perspective. Upping the allowance to £10,000 will provide some incentive to return.”

Alcohol and tobacco

In a bid to support bars and pubs, the Chancellor announced that draught beer and cider will continue to be taxed at a lower rate than supermarket equivalents.

The Draught Relief Scheme, introduced in 2021, cut duties on draught beer and cider by 5%. From August, the discount will increase to 9.2%.

Dubbed the “Brexit Pubs Guarantee” by the Chancellor, this measure means the alcohol duty charged on draught pints will be up to 11p lower than duties charged on supermarket beer.

From August, the duty rate for alcohol sold in supermarkets and other shops will rise 10.1%, in line with inflation.

Smokers also face a tax hike. Tobacco duty will rise by 14.7% from this evening, the Chancellor announced. 

Following the increase, the price of a packet of 20 cigarettes could rise from around £15.35 to £17.65.

Crypto

From 2024/25, self assessment tax forms – which must be completed by the self-employed, high earners and those with investment income, among others – will have a separate section for capital gains made by crypto traders^[38].

Corporation tax

The Chancellor confirmed the increase to corporation tax from 19% to 25% from April 2023, although he said only 10% of businesses, typically the largest, will pay the full rate.

While it was confirmed that the corporation tax super-deduction, which enables businesses to cut their tax bill by 25p in every £1 they invest, will end on 31 March, the Chancellor announced a new tax deduction scheme – full expensing (FE). 

The FE policy will be introduced from 1 April 2023 and will run for three years until 31 March 2026. Under the new scheme businesses can immediately deduct 100% of the cost of certain capital spending from their pre-tax profits, including spending on IT equipment, plant machinery, fire alarms, vehicles and office furniture. This equates to a 25p tax saving for every £1 invested.

The first-year allowance (FYA), which was due to end on 31 March, has been extended for a further three years until March 2026 with a view to making it permanent. This allowance enables businesses to deduct 50% of the cost of plant equipment and machinery (known as special rate assets) from pre-tax profits in the year of purchase.

The combined savings to businesses of FE and the FYA are calculated at £9 billion a year.

But Martin McTague, national chair of the Federation of Small Businesses (FSB), was left unimpressed: “The distinct lack of new support in core areas proves that small firms are overlooked and undervalued. With billions being allocated to big businesses and to households, 5.5 million small businesses and the 16 million people who work for them will be wondering why the choice has been made to overlook them.

“The Chancellor stressed that the UK is one of the best places to do business – but small businesses need more ambition and more focus. Action is what counts if we are to reverse the 500,000 small businesses lost over the last two years.”

Investment zones

The government announced the creation of 12 investment zones outside London, including in the West Midlands, East Midlands, Greater Manchester, Liverpool, the North East, South Yorkshire, Teeside, West Midlands and West Yorkshire, plus at least one each in Scotland, Wales and Northern Ireland. The Chancellor said the aim of the zones was to ‘drive business investment and level up’. 

The move is backed with £80 million in funding for each location over the next five years. This will be in the form of tax breaks for businesses and grant funding. 

It follows the introduction of 10 freeports, created in 2021 around seaports and airports in the UK, where businesses in these regions already take advantage of tax breaks and customs incentives.

The 12 investment zones will be focused around universities and research institutions with the hope this will boost the technology sector, including artificial intelligence. Each region will have to identify a suitable location.

There was also the announcement of £400 million for levelling-up projects in 20 areas across England including Bassetlaw, Blackburn, Oldham, Redcar and Rochdale, and a further £8.8 billion over the next five years for investment in sustainable transport schemes in the regions.

14 March: Bank Of England Figures Note Decrease by Third

New mortgage lending plummeted by a third at the end of 2022, according to the Bank of England’s latest quarterly statistics, suggesting rising interest rates and the continuing cost-of-living crisis took a toll on the housing market, writes Jo Thornhill.

Between October and December, new mortgage commitments (lending agreed for the coming months) was £58.4 billion – 33.5% less than in the previous quarter when it stood at £87.8 billion, and 24.5% less than a year earlier when it was £77.3 billion. 

Excluding the time around the start of the Covid-19 pandemic in 2020, this is the lowest level of new lending since 2015.

The value of mortgage balances in arrears increased by 4.6% in the final quarter of last year from £13 billion to £13.6 billion. The number was up 1.3% over 12 months when it was recorded at £13.5 billion (Q4 2021).

This is the first time there has been a rise since Q1 in 2021 – a reflection of increased financial stress among borrowers.

But arrears account for just 0.81% of total outstanding mortgage balances and remain close to the historical low of 0.78%, recorded in Q3 of 2022. 

On Friday last week (10 March) the regulator, the Financial Conduct Authority, published guidance for lenders on dealing sympathetically with mortgage borrowers who are struggling.

Total outstanding mortgage debt on residential home loans was £1.67 billion at the end of Q4 2022, 3.9% higher than in the same period in 2021. The value of gross mortgage advances was £81.6 billion, which was £4.3 billion lower than the previous quarter, but 16.3% higher than in the same quarter in 2021.

Charlotte Nixon, mortgage expert at wealth management firm Quilter, said: “The period leading to up to Christmas 2022 was rife with uncertainty, and while the country is still not out of the woods, and is still suffering with the impact of higher interest rates and high inflation, the direction of travel does at least look less unpredictable.  

“After the troubling days following the mini budget [in September last year, while Liz Truss was prime minister and Kwasi Kwarteng was Chancellor], mortgage rates have dropped faster than originally expected and therefore there is a chance that this will help encourage more people to the market and more people will be seeking a mortgage. 

“As lenders take part in a race to encourage borrowers, we are seeing rates stabilise as banks compete for customers.”

7 March: Option To Boost State Pension Entitlement

The government is giving UK individuals three additional months to plug the gaps in their National Insurance (NI) contribution records, Andrew Michael writes.

It will extend the deadline from 5 April 2023 to 31 July 2023 for people wanting to top-up missing NI years between 2006 and 2016. This was a transitional period coinciding with the move from a former state pension arrangement to the present one.

To be eligible, you must have qualified or will qualify for the new state pension on or after 6 April 2016.

You can check your national insurance record on the government website^[39].

NI contributions are a means of taxing earnings and self-employed profits. Paying is a legal obligation, and those who do so also earn the right to receive certain social security benefits.

Not everyone manages to keep up with a full set of NI payments, perhaps because of a career break, potentially reducing the amount in benefits to which they are entitled. This includes the amount received in state pension, currently worth £185.15 a week.

To remedy this, the government allows individuals to fill the gaps in their NI history by topping-up missed contributions. Making voluntary contributions can make individuals significantly better off in retirement than not doing so.

After income tax, NICs are the UK’s second largest tax, raising nearly £150 billion in the tax year 2021/22 – about a fifth of all the country’s annual tax revenue.

The decision to extend the deadline comes after many people reported being unable to access vital government helplines, run by the Department for Work and Pensions and HM Revenue & Customs, to receive essential advice before the original 5 April deadline.

Rates vary for different classes of NIC, payable according to employment/self-employment status, but currently stand at £3.15 per week for Class 2 and £15.85 a week for Class 3.

Victoria Atkins, financial secretary to the Treasury, said: “We’ve listened to concerned members of the public and have acted. We recognise how important state pensions are for retired individuals, which is why we are giving people more time to fill any gaps in their NI record to help bolster their entitlement.”

Alice Haine, personal finance analyst at Bestinvest, said: “Buying back missed years is a great way to bolster retirement income.

“Britons typically need at least 10 years of NI contributions to receive anything at all and at least 35 years to receive the maximum amount, which currently stands at £9,600 a year for those retiring after 6 April 2016 and which will rise to £10,600 a year from this April.”

6 March: Hybrids Lead Charge For Electric Vehicles

The number of new vehicles registered in February was 26% higher year-on-year, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT), writes Jo Groves.

There were over 74,000 new registrations, marking the seventh consecutive month of growth as supply chain issues from the pandemic continue to ease. This was significantly lower than the 132,000 new cars registered in January, as is typically the case ahead of the release of the new registration plates on 1 March.

Growth was seen across the market, with large fleets leading the charge with a 46% year-on-year increase, compared to a more modest 6% increase in private car registrations.

Looking by category, super-minis accounted for a third of all deliveries, with multi-purpose vehicles also rising in popularity. At the other end, registrations of executive and luxury saloon cars fell by 15% and 6% respectively.

The transition to electric vehicles continued, with the highest growth of 40% posted by hybrid electric vehicles, while battery electric vehicles now account for one in six new cars registered by UK households.

The SMMT expects the addition of nearly half a million hybrid and fully-electric vehicles to Britain’s roads in 2023. However, it warns of potential problems if charging infrastructure fails to keep pace with increased demand.

Mike Hawes, chief executive of SMMT, said: “After seven months of growth, it is no surprise that the UK automotive sector is facing the future with growing confidence.

“As we move into ‘new plate month’ in March, with more of the latest high-tech cars available, the upcoming Budget must deliver measures that drive this [net-zero] transition, increasing affordability and ease of charging for all.”

Hugo Griffiths, consumer editor of carwow, said: “The approach of spring really does seem to mark a time of renewal and regeneration where the UK car market is concerned, with February’s registration figures being a mere 6.5% down on pre-pandemic 2020.

“Given the maelstroms faced by the UK car industry and the economy as a whole over the last few years, we should be shouting this success from the rooftops – while keeping every available appendage crossed that this upswing continues.”

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14 February: Regulation Of BNPL Sector Expected 2024

The government is consulting on regulation of the controversial buy-now-pay-later (BNPL) credit sector, which is used by an estimated 10 million people in the UK.

The proposed rules would see BNPL firms regulated by the Financial Conduct Authority (FCA), the watchdog that governs banks, insurance companies and other financial services businesses.

Two years ago, the FCA said regulation was needed to protect consumers, while last summer it warned firms about the use of misleading advertising and promotions, especially on social media.

Under the new proposals, BNPL customers would also, for the first time, be able to take complaints to the Financial Ombudsman Service (FOS).

The government says it wants to protect customers from “unconstrained borrowing” while still ensuring those who need it have access to interest-free credit.

Ahead of regulation, the FCA will monitor the market and intervene using its existing powers where it identifies consumer detriment. The government says that, as regulation approaches, currently unauthorised BNPL lenders have a strong incentive to treat customers fairly and prepare their business models shead of applying for FCA authorisation.

BNPL schemes enable people to pay for purchases in interest-free instalments over a matter of weeks, usually with no credit or affordability checks taking place. Penalties may be levied for missed or late payments.

At present, customers have no recourse to compensation or redress if something goes wrong.

Firms make money through revenue-splitting arrangements with retailers. Leading BNPL players include ClearPay, Zilch, Klarna and Affirm.

The popularity of BNPL has soared in the cost-of-living crisis, with consumers reportedly using the facility to pay for items such as groceries and utility bills, rather than so-called ‘discretionary’ spending on clothes and non-essentials.

Launching its eight-week consultation, the government said: “With more people taking out these credit agreements and the potential risks of consumers being exposed to financial harm, the government is setting out proposed new regulations.

“It will mean BNPL credit products are set to be regulated by the FCA and consumers will have the new right to take complaints to the Financial Ombudsman Service.

“Under new rules providers will have to give consumers key information about their loans and issue credit that is genuinely affordable.”

Assuming the consultation backs the government proposals, legislation will follow, with the regulations expected to be in force next year.

Consultation responses should be submitted by 11 April 2023 to [email protected].

Jinesh Vohra, founder of open banking app Sprive, said: “Regulating BNPL credit is a positive step towards protecting consumers from potential harm. BNPL companies have been largely unregulated, and without thorough affordability checks, I worry many consumers have taken on more debt than they can handle. 

“It’s great to see that, with this draft legislation, BNPL companies will be held accountable for their lending practices and will need to conduct affordability checks to ensure they are not putting consumers at risk.”

The government is also thought to be working on plans to bring the cryptocurrency sector within the regulatory ambit for the first time. As with BNPL, crypto customers have no source of redress if something goes wrong.

10 February: Tenants Suffer As Cost-Of-Living Crisis Bites

The number of tenants evicted from rental properties surged by 98% at the end of 2022 as the cost of living crisis deepened, according to repossession statistics published by the Ministry of Justice, writes Jo Thornhill.

The government figures, which cover England and Wales, show there were 5,409 repossessions in the three months from October to December 2022 – compared to 2,729 in the same period in 2021. 

By law landlords must follow a three-stage process to evict a tenant from their rented property. This includes giving the tenant valid notice, issuing a possession order through the courts and then applying for a warrant for eviction. 

The MoJ data found that, in addition to repossessions, landlords made 20,460 repossession claims in the last quarter of 2022 (up 42% on the same period in 2021), there were 16,158 repossession orders (up 135%) and 8,717 warrants (up 103%).

Despite the sharp rise, the MoJ said rental property repossessions have not come back to pre-pandemic levels. At the most recent peak – in 2014 and 2015 – there were between 10,000 and 11,000 repossessions every quarter.

Polly Neate, chief executive of housing and homelessness charity Shelter, said: “Every eviction notice that lands on someone’s doormat brings with it fear and uncertainty. No one wants to be forced out of their home, but these court figures show that’s happening to more and more private renters in this country.  

“The chronic lack of social homes means the demand for overpriced and unstable private rentals has ballooned, and more people are being pitted against each other in the hunt for a home. Every day we hear from desperate families who’ve been served with no-fault eviction notices for daring to complain about poor conditions, or because their landlord wants to cash in on rising rents.”

Mortgage repossession claims also increased 23% between October and December 2022, according to the MoJ, from 2,570 to 3,160. Repossessions by bailiffs were up 134% from 313 to 733. 

Claims, warrants and repossessions of mortgaged homes all steadily increased throughout last year, although they remain lower than pre-covid 2019 levels.

The government has proposed a ban on no-fault evictions as part of the Renters Reform Bill that is currently going through Parliament.

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6 February: Pure And Hybrid Electrics Increase Market Share

The number of new vehicles registered last month was up almost 15% on January 2022, according to the latest figures from the Society of Motor Manufacturers and Traders, writes Mark Hooson.

The 131,994 new registrations mark a sixth month of consecutive growth in the market and the best January for car sales since 2020, before the start of the Coronavirus pandemic.

Year-on-year, data showed petrol vehicle sales up 14.6% to 58,973, diesel sales down 12.1% to 5,280 and Mild Hybrid Electric Vehicles (MHEVs) up 8.3% to 22,362.

The upward trend of electric vehicle registrations continued in January, and Hybrid Electric Vehicles (HEVs) helped to drive the overall growth, accounting for 14.4% of all new vehicle registrations during the month.

Elsewhere, Battery Electric Vehicle (BEV) registrations were up 19.8% to 17,294 cars, which comprised 13.1% of new registrations. This figure was, however, slightly lower than 2022’s monthly average.

While the SMMT expects electric vehicles to account for more than one in four new registrations this year, it says charging infrastructure is failing to keep pace. In the last quarter of 2022, there was one charging point for every 62 electric vehicles, down from one charging point per 42 vehicles at the end of 2021.

Hugo Griffiths at carwow said: “Despite fighting battles on numerous fronts, including supply-chain issues, trade difficulties and recoil from Covid, the UK car market enters 2023 in relatively good health, as January saw registrations inch closer to pre-lockdown levels.

“The real success story is electric cars, registrations of which rose by a fifth compared to January 2022, while fleet and business buyers are driving growth despite a slight drop in the number of private individuals purchasing new cars.

“With EVs making up 13.1% of all new-car registrations, it’s clear that both drivers and the car industry are following Government advice as they switch to electric ahead of the ban on the sale of new petrol and diesel cars in just seven years.

“What needs to happen now, though, is for policymakers to get serious about public recharging infrastructure and incentives for private chargers, with both anecdotal experiences and hard data painting a clear, unappetising picture: we don’t have enough chargers, and we urgently need more.”

Commenting on the new data, Lisa Watson of Close Brothers Motor Finance said: “One in 10 Brits are set to buy an electric car next, and more than one in five will move to hybrid. To meet this demand, the onus remains on car dealers to utilise available insight to stock forecourts.”

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1 February: Cost-Of-Living Crisis Triggers Spike In Demand

Loans made to their members by the UK’s 388 mutual credit unions stood at a record high of £1.92 billion in the third quarter of 2022, according to figures from the Bank of England, writes Candiece Cyrus.

According to the Bank, this was £51 million higher than the previous quarter and up £255 million compared with the same period in 2021.

The Bank added that total credit union assets exceeded £4.5 billion for the first time last autumn.

First started in 1964, credit unions are local financial co-operatives that are owned and controlled by their members, providing a range of services including savings and loans.

The recent rise in the cost of borrowing combined with the withdrawal of short-term credit providers from the market has left many people short of choice when looking for affordable credit products.

Credit union loans often feature low rates and are designed to provide a financial lifeline for those on lower incomes who are less well served by the mainstream lending sector.

Bank of England data showed that there were 1.94 million adult members of credit unions in the third quarter of last year. This was a dip of around 2,000 people compared with the previous three-month period, but an increase on the 1.9 million members that had been recorded a year earlier.

1 February: Parents Funding Adult Kids In Cost-Of-Living Crisis

Amid the cost-of-living crisis, parents are increasingly providing financial support to their grown-up children, even helping pay for everyday necessities, writes Jo Groves.

The Saltus Wealth Index, released today, reveals that 55% of people are lending money to their adult children as a direct result of the economic situation. And this rises to over 70% for high-net worth individuals with assets of more than £250,000.

Education tops the list of expenditure, followed by groceries, household costs and energy bills. At least a quarter of parents are helping with rent and mortgage payments, hobbies and holidays.

This has raised concerns that parents are risking their own financial security to provide assistance to grown-up children. Almost a quarter of parents are dipping into pensions or salaries, while a significant proportion have tapped into the equity in their house or sold other assets.

Mike Stimpson, partner at Saltus, wealth management firm, said: “The data shows that many are actually starting to make changes to their financial future to help out – one in five admit they have reduced their own pension contributions to provide support to their kids, rising to more than one in four (27%) among wealthier respondents.

“It is hard to know how long this level of support will go on, or if it will become more commonplace as the cost-of-living crisis continues to bite.”

24 January: More Missing Monthly Payments As Crisis Bites

The number of credit card holders struggling to make their required monthly payments looks to be on the rise, writes Laura Howard.

Data from analytics company, FICO, shows a 14.8% increase in the number of people missing two consecutive monthly credit card payments in November 2022 compared to 12 months previously.

The number of credit card holders with three consecutive missed payments was 10.3% higher over the same period. Each missed payment type has shown an upward trend since May and June respectively.

The depletion of savings built up during the pandemic, higher interest rates and continued high levels of inflation, are all likely factors behind the increased stress on credit card repayments, according to FICO. 

However, those who are managing to make monthly payments appear to be continuing to do so, with the number of credit card accounts missing just one payment dropping by 4.2% month-on-month – although still 9% up on last year. 

The average balance held on a credit card in November 2022 stood at £1,585 according to FICO, while the average monthly spend was £755 – both figures having increased on a monthly and annual basis.

Reliance on credit cards for cash softened, however, with ATM withdrawals dropping by 10.4% month-on-month and a significant 32% down on last year.

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23 January: Average Funeral Price Dips Below £4,000 In 2022

Average funeral costs fell 2.5% between 2021 and 2022, but overall end-of-life expenses are up 3.8%, writes Bethany Garner.

According to the annual Cost of Dying Report from insurance provider, SunLife, average funeral prices have fallen for the second consecutive year.

The report, which gathered data and insights from 100 funeral directors and 1,508 individuals who have planned a funeral over the past four years, found the average UK funeral now costs £3,953.

Mark Screeton, chief executive at SunLife, said: “It’s surprising to see, at a time when everything else is going up in price, that funeral costs have fallen for a second consecutive year.

“The continued fall in funeral costs may, in part, be down to certain trends from the days of lockdown remaining popular, even after the pandemic. Direct cremations [cremations with no accompanying funeral service], for instance, are a cheaper alternative, and became necessary during COVID-19. Yet we’ve seen their levels relatively unchanged since.” 

London remains the most expensive region for funerals, with the average service costing £5,283, a 1.4% year-on-year decrease. 

Despite having risen 8.5% since 2021, average costs are lowest in Northern Ireland at £3,317. Prices fell most sharply in Yorkshire and the Humber, dropping 13% to £3,742.

While average funeral prices dipped in 2022, the overall ‘cost of dying’ rose 3.8% year on year, SunLife reports. Total costs – including venue hire, catering, professional fees, funeral notices, flowers and limousine hire – reached £9,200 in 2022.

Professional fees – those fees incurred for administering the deceased’s estate – have risen 10.9% since 2021, now costing £2,587 on average. The funeral itself remains the single largest expense, however. 

According to SunLife’s research, 69% of funerals are paid for, at least in part, by provisions put in place by the deceased. Of these, 41% are funded by savings and investments, 39% by a prepaid funeral plan, and 37% by life insurance policies. 

For 41% of funerals, however, these provisions do not cover total expenses. On average, the deceased’s family must find an additional £1,870 to cover costs.

SunLife says these expenses leave almost a fifth (19%) of families with financial concerns. To cover outstanding funeral costs, 27% of these families report using a credit card, while 14% say they took out a loan, and 33% used money from personal savings or investments. 

Mr Screeton said: “Making some kind of provision for your own funeral can be a big help to your family at what will be a difficult time.”

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9 January: Customers Pay More For Cover Despite New Rules To Improve Fairness

Car insurance^[40] premiums have soared by nearly a third over the past year, while the cost of home cover^[41] has risen by about a fifth, according to data suppliers Consumer Intelligence (CI), writes Jo Thornhill. 

This is despite rule changes imposed on the insurance industry in 2022 by the financial regulator, the Financial Conduct Authority, that were designed to make insurance pricing fairer for consumers.

CI said that the cost of car cover rose by 30% on average in the past 12 months and that home insurance was 17% dearer. 

The new regulations said that insurers couldn’t charge existing customers more for their renewal premium than the prices quoted for equivalent new customers. It was widely expected that the move would prevent sharp increases to premiums at renewal for millions of drivers. 

But market data published by CI shows that the opposite has happened. 

In the third quarter of 2022, more than half of motorists renewing their insurance reported that their premium had increased. Fewer than one in three saw a fall in the cost of their car cover.

There has also been a similar trend in home insurance renewals.

Ian Hughes, CEO of Consumer Intelligence, said that although renewal pricing went down on average at the beginning of 2022, after the implementation of the new rules, inflationary pressures have subsequently caused renewals to rise sharply.

Mr Hughes said: “Inflationary pressures have filtered into the prices presented to both renewing customers and those hunting for a new policy. This upward pressure on premiums is driven primarily by claims inflation, which includes the increasing cost of motor parts, materials and labour, plus ongoing supply chain issues.”

He added: “Insurance has always been a grudge purchase and, as a result, consumers often opt for the cheapest policies available. This is becoming increasingly true as the cost of living crisis deepens.”

In a separate study on the impact of the rising cost of living, CI found that 6.6% of consumers cancelled an insurance policy in December 2022 due to rising costs. The most likely forms of cover to be dropped were legal expenses insurance, travel^[42] and gadget^[43] cover.

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5 January: Electric Vehicle Sales Surge 40% In 2022

The number of new cars sold in 2022 slumped to a 30-year low, despite increasing numbers of electric vehicle (EV) registrations, writes Mark Hooson.

According to figures out today from the Society of Motor Manufacturers and Traders (SMMT), a total of 1.61 million new cars were registered last year, the lowest figure since 1992, when 1.59 million units were registered. The number was also down 2% on 2021’s total. 

Production has been subdued for the last three years, owing to supply chain shortages and pandemic disruption, but the final five months of 2022 showed numbers beginning to climb.

Total battery electric vehicle (BEV) registrations in 2022 were up by more than 40% on the previous year. In December, BEVs accounted for 33% of vehicles registered.

The fully electric Tesla Model Y and Model 3 were the top two vehicles registered in December, and the former was the third most popular of the year behind Vauxhall’s Corsa and Nissan’s Qashqai.

Diesel vehicles were the category that accounted for the lowest number of new registrations at just over 82,000 units. Petrol registrations were much higher at around 682,000. 

Meanwhile, 292,000 ‘mild hybrid electric vehicles’ or MHEVs (that is, vehicles with a small electric generator in place of a starter motor and alternator, plus a small, rechargeable lithium-ion battery.)

The SMMT says 2023 will be a better year for the industry as supply chain issues are resolved and semiconductor shortages ease. It is predicting 1.8 million registrations this year.  

Mike Hawes, SMMT chief, said: “The automotive market remains adrift of its pre-pandemic performance but could well buck wider economic trends by delivering significant growth in 2023. 

“To secure that growth – which is increasingly zero emission growth – the government must help all drivers go electric and compel others to invest more rapidly in nationwide charging infrastructure.

“Manufacturers’ innovation and commitment have helped EVs become the second most popular car type. However, for a nation aiming for electric mobility leadership, that must be matched with policies and investment that remove consumer uncertainty over switching, not least over where drivers can charge their vehicles.”

Jon Lawes, managing director of Novuna Vehicle Solutions, said: “As we enter 2023, the road to net zero remains bumpy, with EV infrastructure failing to keep pace with adoption. 

“Our analysis shows that, to hit government targets, 30,000 new charging points will need to be built every single year for the next seven years, a tenfold increase in the number put in the ground in the past decade. 

“Addressing the fragility of the current charging network, at scale and ahead of need, is critical to support mass adoption of EVs which requires urgent collaboration and investment from across the sector in the year ahead.”

Hugo Griffiths at car trading site carwow, said: “Given how difficult a few years it has been both for consumers and the industry, the fact that 183 new cars were registered every hour in 2022 – more than three a minute – shows that both buyers’ appetites and factories’ abilities to produce vehicles remain in far ruder health than some might consider.

“The UK’s reclamation of its position as Europe’s second-largest market for new cars also shows how important a player we remain on the Continent’s stage, something reinforced by the fact the Nissan Qashqai – a car partly conceived and entirely built here – was the most popular new car of 2022.”

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1 January: English Bus Fares Capped At £2 Outside London

The government’s £60 million ‘Get Around for £2’ scheme is now up and running. Operating between 1 January and 31 March, the scheme caps bus fares at £2 for passengers travelling outside London in England, writes Candiece Cyrus.

The government said passengers will save almost a third off the average £2.80 bus fare. Passengers in rural areas can face fares for a single journey as high as £5.

Commuters in London can already take advantage of Transport for London’s Hopper fare which allows adults to take an unlimited number of journeys by bus within an hour for £1.65. They must touch in using the same card or device on all buses to trigger the cap automatically.

Over 130 bus operators such as Stagecoach and National Express are taking part in the scheme and its campaign to encourage more commuters to take buses to help the environment. 

National Express is also freezing child fares at £1.

The government expects the campaign to take two million cars off the road and in turn reduce carbon emissions, while also helping commuters with travel costs for their studies, work and medical appointments, as the cost of living crisis grips the nation.

The cap is a part of the government’s wider Help for Households campaign, which advises households most affected by the cost of living crisis on ways they can make savings.

It will also support the use of buses as the industry recovers from a reduction of its services during the pandemic. The government says it will build on its £2 billion investment throughout the pandemic which was used to fund improved services, and new hydrogen and electric buses.

A bus fares pilot scheme, launched in Cornwall in April 2022, backed by £23.5 million of government funding, has seen passenger numbers rise.

It allows passengers to buy a £2.50 day ticket within towns or a £5 day ticket for travel across all of Cornwall and is valid across multiple bus operators.

16 December: Latest Postcodes Where Eligible Households Will Receive Cold Weather Payments

Hundreds more households on certain benefits will receive a Cold Weather Payment of £25 as freezing temperatures grip the UK and the Met Office warns of continued snow and ice, writes Candiece Cyrus.

For more information on the postcode districts in which eligible households are already due to receive payments, see 9 December post below.

Here are the latest postcodes where eligible households will receive a £25 payment:

16 December 2022

• Aberporth – SA35-48, SA64-65.
• Mona – LL33-34, LL42-49, LL51-78.
• Rhyl – LL15-19, LL22, LL26-32.

15 December 2022

• Crosby – CH41-49, CH60-66, FY1-8, L1-40, PR1-5, PR8-9, PR25-26.
• Loftus – SR8, TS1-8, TS10-14, TS17-20, TS22-27.
• North Wyke – EX17-22, EX37-38, PL19-21,TQ10-11, TQ13.
• St. Bees Head – CA13-15, CA18-28.
• Shoeburyness – BR5-8, CM0, CT5, CT6,DA1-18, ME1-5, ME7-8, ME9 -13, RM1-3, RM5-20, SS0-17

14 December 2022

• Thorney Island – BN1-3, BN9-18, BN25, BN41-43, BN45, PO1-22, PO30-41, SO14-19, SO30-32, SO40-43, SO45, SO50-53.

13 December 2022

• Albemarle – DH1-7, DH9, DL4-5, DL14-17, NE1-13, NE15-18, NE20-21, NE23, NE25-46, SR1-7, TS21, TS28-29
• Carlisle – CA1-8, DG12, DG16

12 December 2022

• Benson – HP5-23, HP27, OX9,OX10,OX33, OX39,OX44,  OX49, RG9, SL7-9
• Bingley- BB4, BB8-12, BB18, BD1-22, HD3, HD7-9, HX1-7, LS21, LS29, OL13-14, S36
• Exeter Airport – EX1-12, EX24, TQ1-6, TQ9, TQ12, TQ14
• Libanus – NP4, NP11-13, NP22-24, NP44, SA9
• Rochdale – L0-9, M24, M26, OL1-12, OL15-16,SK15
• Rostherne – CW4, CW6-11, M1-9, M11-23, M25, M27-35, M38, M40-41, M43-46, M50, M90, PR7, SK1-12, SK14, SK16, WA1-16, WN1-8
• Trawsgoed – LL35-40, SY20, SY23-25

11 December 2022

• Redesdale – CA9, DH8, NE19, NE47-49.
• Rhyl – LL15-19, LL22, LL26-32.
• Shap – CA10-12, CA16-17, LA8-10, LA21-23.
• Yeovilton – BA4-10, BA16, BA20-22, BS25-28, DT9-10, SP8, TA1-20, TA23.

10 December 2022

• Heathrow – BR1-4, CR0, CR2-9,E1-18, E20, E1W, EC1-4, EN1- 5, EN7-11, HA0-9, IG1-11, KT1-24, N1-22, NW1-11, SE1-28, SL0, SL3, SM1-7, SW1-20, TW1-20, UB1-11, W1-14, WC1-2, WD 1-2.

9 December 2022

• Capel Curig – LL24-25, LL41.
• Charterhall – NE71.
• Chivenor – EX23, EX31-34, EX39.
• Dunkeswell Aerodrome – DT6-8, EX13-15, TA21.
• Herstmonceux – BN7-8, BN20-24, BN26-27, TN21, TN31-40.
• Leconfield – DN14, HU1-20, YO11-12, YO14-17, YO25.
• Liscombe – EX16, EX35-36, TA22, TA24.
• Morpeth, Cockle Park – NE22, NE24, NE61-70.
• Sheffield, DN1 – 8, DN11-12,HD1-2, HD4-6, S1-14, S17-18, S20-21, S25-26, S35, S40-45, S60-66, S70-75, S80-81, WF1-17.
• Waddington – DN9-10, DN13, DN15-22, DN31-41, LN1-13, NG23-24, PE10-11, PE20-25.

9 December: Eligible Households In Coldest Areas To Receive £25

Eligible households in hundreds of postcode districts across England and Wales are due to receive a Cold Weather Payment to help cover heating costs after the Met Office and UK Health Security Agency (UKHSA) issued a weather alert on Monday, writes Candiece Cyrus.^[44]

They warned of temperatures low enough to potentially pose health risks in all regions of England, while the Met Office has also issued yellow warnings for ice in Wales, Northern, Eastern and Western parts of England. 

Freezing temperatures will persist long enough for households in affected areas to qualify for a £25 Cold Weather Payment if they meet eligibility criteria and are receiving certain benefits These include: 

• Income Support
• Income-based Jobseeker’s Allowance
• Income-related Employment and Support Allowance
• Universal Credit
• Support for Mortgage Interest
• Pension Credit (those receiving Pension Credit may also qualify for Winter Fuel Payments – another automatic payment of between £100 and £300 to help pay heating bills. This has been boosted this year by a £300 per household Pensioner Cost of Living Payment).

As part of the scheme, which runs from 1 November to 31 March each year, the government provides eligible households with a payment each time the average temperature for their postcode district is forecast to be 0°C or below, or has already been recorded as such, for seven consecutive days.

Recipients do not need to take action as payments should be automatically credited to the bank accounts of those who qualify within 14 days of a trigger.

The Cold Weather Payment scheme ceased to operate in Scotland earlier this year. It has been replaced with an annual Winter Heating Payment of £50. 

Eligibility criteria is similar to that for Cold Weather Payments. Payments for this winter will not be made until February 2023.

The postcodes triggered for a £25 payment this week are:

5 December 

• Redesdale – CA9, DH8, NE19, NE47-49
• Shap – CA10-12, CA16-17, LA8-10, LA21-23
• Yeovilton – BA4-10, BA16, BA20-22, BS25-28, DT9-10, SP8, TA1-20, TA23
• Benson – HP5-23, HP27, OX9,OX10,OX33, OX39,OX44,  OX49, RG9, SL7-9
• Bingley- BB4, BB8-12, BB18, BD1-22, HD3, HD7-9, HX1-7, LS21, LS29, OL13-14, S36
• Exeter Airport – EX1-12, EX24, TQ1-6, TQ9, TQ12, TQ14
• Libanus – NP4, NP11-13, NP22-24, NP44, SA9
• Rochdale – L0-9, M24, M26, OL1-12, OL15-16,SK15
• Rostherne – CW4, CW6-11, M1-9, M11-23, M25, M27-35, M38, M40-41, M43-46, M50, M90, PR7, SK1-12, SK14, SK16, WA1-16, WN1-8
• Trawsgoed – LL35-40, SY20, SY23-25

6 December 

• Albemarie – DH1-7, DH9, DL4-5, DL14-17, NE1-13, NE15-18, NE20-21, NE23, NE25-46, SR1-7, TS21, TS28-29
• Almondsbury – BS1-11, BS13-16, BS20-24, BS29-32, BS34-37, BS39-41, BS48-49, GL11-13, NP16, NP26
• Bainbridge – BD23-24, DL8, DL11-13
• Carlise – CA1-8, DG12, DG16
• Coleshill – B1-21, B23-38, B40, B42-50, B60-80, B90-98, CV1-12, CV21-23, CV31-35, CV3 CV47, DY1-14, LE10, WS1-15, WV1-16
• Hereford – GL1-6, GL10, GL14-20, GL50-53, HR1-9, NP7-8, NP15, NP25, SY8, WR1-11, WR13-15
• Keele – CW1-3, CW5, CW 12, ST1-8, ST11-12, ST14-21
• Leek Thorncliffe – DE4, DE45, S32-33, SK13, SK17, SK22-23, ST9-10, ST13
• Little Rissington – CV36, GL54-56, OX7, OX15-17, WR12
• Llysdinam – LD1-2, LD4-8, SA19-20, SY7, SY9, SY18
• Pembury Sands – SA1-8, SA14-18, SA31-34, SA61-63, SA66-73
• Shawbury – SY1-6, SY11-13, TF1-13
• Stonyhurst – BB1-3, BB5-7, LA2, LA6-7, PR6
• Stowe – NN1-7 NN11-13, MK18
• Walney Island – LA1, LA3-5, LA11-20
• Westonbirt – BA1-3, BA11, BA13-15, GL7-9, RG17, SN1-6, SN8-16, SN25-26
• Woburn – MK1-17, MK19, MK40-46, NN8-10, NN29, PE19, SG5-7, SG15-19

7 December 

• Boscombe Down -BA12, RG28, SO20-23,SP1-5, SP7, SP9-11
• Bramham – HG1 – 5, LS1-20, LS22-28, YO1, YO8, YO10, YO19, YO23-24, YO26, YO30-32, YO41-43, YO51, YO60-61
• Brize Norton – OX1-6, OX8, OX11-14, OX18, OX20, OX25-29, SN7
• Charlwood – BN5-6, BN44, GU5-6, ME6, ME14-20, RH1-20, TN1-20, TN22, TN27
• Fylingdales – YO13, YO18, YO21-22, YO62
• Hawarden Airport – CH1-8, LL11-14, SY14
• Hurn – BH1-25, BH31, DT1-2, DT11, SP6
• Lake Vrnwy – LL20-21, LL23, SY10, SY15-17, SY19, SY21-22
• Leeming – DL1-DL3, DL6,DL7, DL9, DL10, TS9, S16 YO7
• Marham – CB6-7, IP24-28, PE12-14, PE30-38
• Nottingham – CV13, DE1-3, DE5-7, DE11-15, DE21-24, DE55-56, DE65, DE72-75, LE1-9, LE11-14, LE16-19, LE65, LE67, NG1-22, NG25, NG31-34
• Odiham – GU1-4, GU7-35, GU46-47, GU51-52, RG1-2, RG4-8, RG10, RG12, RG14, RG18-27, RG29-31, RG40-42, RG45, SL1-2, SL4-6, SO24
• Rothamsted – AL1-10, EN6, HP1-4, LU1-7, SG1-4, SG12-14, WD3-7, WD17-19, WD23-25

8 December 

• Andrewsfield – CB1-5, CB10-11, CB21-25, CM1-9, CM11-24, CM77, CO9, RM4, SG8-11
• Tibenham – NR1-35
• Wattisham – CB8-9, CO1-8, CO10-16, IP1-23, IP29-33
• Wittering – LE15, NN14-18, PE1-9, PE15-17, PE26-29

Receiving Cold Weather Payments will not affect the payment of any benefit a household already receives. Anyone who is due a Cold Weather Payment but does not receive one when temperatures drop should be able to get help from their pension centre or Jobcentre Plus Office. 

9 December: Zoopla Reports Rent Inflation At 12.1%

Data from property platform, Zoopla, shows average UK rental prices rose 12.1% in the year to October, writes Bethany Garner.

The rise puts rental affordability for single tenants at the lowest levels for a decade, with the average payment now swallowing 35% of a typical earner’s income. 

Average wages rose just 6% in the same period, stretching affordability for renters amid the cost of living crisis^[45]. 

Zoopla says significant rent inflation is the result of demand outstripping supply in the private sector. Demand is 46% above average, while total supply is 38% lower, it reports. 

Michael Cook, group managing director at Leaders Romans Group, said: “[The government’s] dual-pronged approach of new legislation and taxation is pushing much needed good landlords out of the sector and driving average rents due to lack of supply.”

He added: “As property sales slow, the number of people continuing or returning to rent is rising, causing an even greater supply and demand imbalance within the rental market.” 

Rental prices have risen most in major cities, Zoopla found. In London, prices rose by 17% annually, while they rose 15.6% in Manchester, 14.1% in Glasgow and 12.3% in Birmingham. Conversely, Hull, York and Oxford all experienced a more modest increase of 8%. 

For the 75% of private tenants who do not move home every year, the outlook is brighter. Among this group, rents rose by a comparatively low 3.8% in the 12 months to October. 

In response to mounting rental costs, more tenants are opting to share a home. According to research from the Resolution Foundation, the average private renter now has 16% less space than they did two years ago, suggesting more renters are pairing up to reduce housing costs.

Others are opting to downsize. Zoopla says it has seen increased demand for one and two bedroom flats — which now account for 32% of its rental enquiries — and reduced interest in houses. 

Richard Donnell, executive director at Zoopla, said: “A chronic lack of supply is behind the rapid growth in rents which are increasingly unaffordable for the nation’s renters, especially single-person households and those on low incomes.”

Although rental price inflation shows little sign of slowing in the short term, Zoopla predicts a steady reduction to 5% over the course of 2023.

Mr Donnell added: “Increasing investment in new rental supply from multiple sources is the main route to reducing rental growth and making for a more sustainable private sector.”

22 November: Watchdog Tells Firms To Boost Quality And Access

The Financial Conduct Authority (FCA) has told credit reference agencies to improve their services to help consumers make better decisions about loans and other forms of borrowing, Andrew Michael writes.

Credit information reports^[46] and services, supplied by a handful of agencies, influence consumer decisions across a range of household finance-related issues, from setting up a mobile phone contract to taking out a loan or mortgage.

These files contain information about consumers, from their presence on the Electoral Roll and County Court Judgements against their name, to credit-based products they have used. This information is used to compile a credit score which rises and falls according to an individual’s financial behaviour.

The FCA said the majority of consumers (90%) are aware of the existence of credit files. But it added that it wants services to provide higher quality information so that lending decisions better reflect people’s financial circumstances.

“This should help make sure that consumers are not denied credit they could afford or given credit they can’t afford,” the regulator said.

According to the FCA, lenders say they are “largely happy” with the breadth of information about consumers to which they have access. But it adds that lenders point to “differences in the information held by different credit reference agencies”.

The FCA has proposed a range of measures including establishing an industry body to oversee arrangements about sharing data as well as simplifying ways for consumers to access their credit file and challenge any inaccuracies.

Sheldon Mills, the FCA’s executive director, consumers and competition, said: “It is vital that the credit information market works effectively for firms and consumers. We want to see industry reform to help deliver the changes, but in the meantime, it is important consumers know how to access their credit information and talk to their lenders if they are facing difficulties.”

17 November: Hunt Honours Triple Lock For Pensions And Benefits

Chancellor Jeremy Hunt’s Autumn Statement extended the freeze on income tax thresholds until 2028, meaning more people will pay higher levels of tax as their earnings increase.

He also confirmed that the Energy Price Guarantee will be extended for 12 months from April 2023, but that typical annual bills will rise from the current level of £2,500 to £3,000.

He announced measures designed to improve the UK’s energy independence and promised further investment in energy efficiency, infrastructure and technological innovation.

Controversially, he said electric vehicles will become liable for vehicle excise duty from 2025.

The Chancellor also announced that, from next April, the State pension and benefits will increase by 10.1% – the rate of inflation in September – in line with the ‘triple lock’ mechanism.

The Office for Budget Responsibility, in its Economic & fiscal Outlook published to support the Autumn Statement, includes a statement that fuel duty may increase by 23% in March 2023, estimating that this would add 12 pence to the price of a litre of motor fuel.

This was not mentioned by Mr Hunt in his speech.

INCOME TAX

Income tax thresholds will remain frozen until 2028, two years beyond the current date. This means that, as earnings rise, more people will be brought into paying tax, and more will find themselves paying tax at 40%.

The income tax personal allowance will thus remain at £12,570, with the threshold for higher rate tax fixed at £50,270.

The threshold at which the additional 45 pence rate of income tax is paid will be reduced from £150,000 to £125,140 from April next year.

Mr Hunt also announced that the current capital gains tax annual tax-free allowance of £12,300 will be cut to £6,000 from the start of the new tax year in April 2023. The amount will be halved again, to £3,000, in April 2024.

The current annual dividend tax allowance, the amount an individual can receive in share dividends each year before paying tax, is to be cut from £2,000 to £1,000 from the new tax year next April. It will then be halved again, to £500, from April 2024.

ENERGY BILLS

The Energy Price Guarantee, introduced by Liz Truss as a replacement for the Ofgem energy price cap, will remain in force at its current level until April 2023, keeping annual bills for typical households to around £2,500.

From April 2023, this figure will rise to £3,000 per annum, with the Guarantee extended for 12 months.

According to analysts Cornwall Insights, typical bills would reach £3,739 next year if the guarantee were not in place.

The EPG will be kept under review and adjusted downwards if wholesale prices fall during the period in question.

The government will also consult with consumer groups and industry to consider the best approach to consumer protection from April 2024, when the EPG comes to an end, including options such as social tariffs, as part of wider retail market reforms.

The government is also doubling to £200 the amount to be paid to households that use alternative fuels, such as heating oil, liquified petroleum gas, coal or biomass, to heat their homes. This support will be delivered “as soon as possible” this winter.

The Energy Bill Relief Scheme will remain in place for business energy consumers until the end of March 2023. It is currently under review to determine what support may be given to companies from April onwards, although Mr Hunt said the scale of support is likely to reduce.

PENSIONS & BENEFITS

The government is adhering to the ‘triple lock’, which means pensions and benefits will rise next April by 10.1% – September’s measure of inflation.

The government will make cost of living payments in 2023/24 to help vulnerable households tackle higher bills: those on means-tested benefits will receive an additional £900, pensioner households will receive an additional £300 and individuals on disability benefits will receive an additional £150 Disability Cost of Living payment. Details on timing and eligibility will be provided in due course.

FUEL DUTY

According to the Office for Budget Responsibility, the government is considering a substantial hike in fuel duty next year.

The OBR documentation covering today’s events says: “… the planned 23% increase in the fuel duty rate in late-March 2023, which adds £5.7 billon to receipts next year. This would be a record cash increase, and the first time any Government has raised fuel duty rates in cash terms since 1 January 2011. It is expected to raise the price of petrol and diesel by around 12 pence a litre.”

Motoring groups have called on the government to clarify whether this amounts to a policy commitment.

ELECTRIC VEHICLES

From April 2025, electric cars, vans and motorcycles will begin to pay vehicle excise duty in the same way as petrol and diesel vehicles. 

• new zero emission cars registered on or after 1 April 2025 will be liable to pay the lowest first year rate of VED (which applies to vehicles with CO2 emissions 1 to 50g/km) currently £10 a year. From the second year of registration onwards, they will move to the standard rate, currently £165 a year 
• zero emission cars first registered between 1 April 2017 and 31 March 2025 will also pay the standard rate 
• zero and low emission cars first registered between 1 March 2001 and 30 March 2017 currently in Band A will move to the Band B rate, currently £20 a year 
• zero emission vans will move to the rate for petrol and diesel light goods vehicles, currently £290 a year for most vans 
• zero emission motorcycles and tricycles will move to the rate for the smallest engine size, currently £22 a year 
• rates for Alternative Fuel Vehicles and hybrids will also be equalised.

Commenting on the changes, Hugo Griffiths at car website carwow said: “The Government is caught in a bit of a trap when it comes to encouraging electric cars: it wants us to buy EVs to help meet net zero goals and reduce local air pollution, but the more this happens, the less money the Treasury receives from fuel duty and other revenue streams.

“Ending the exemption from road tax for electric cars from 2025 will be unwelcome news for EV owners, but this £165 annual cost will raise a meaningful amount of revenue for the Government’s coffers.

“The devil is in the detail, though, and there’s a nasty surprise lurking around the corner for existing EV owners: it’s not just new EVs that will have to pay road tax from 2025: electric cars registered from 1 April 2017 will also be subject to the £165 charge.

“Given changes to road tax regimes tend not to be retrospective, not honouring the system that was in place when older cars were purchased, seems rather unfair.”

COUNCIL TAX

Mr Hunt announced that, from April 2023, local authorities in England will be able to raise council tax by up to 5% a year (3% plus 2% if they have social care responsibilities) without holding a referendum.

It means that an annual bill for a household in a band D council tax bracket, could rise from an average of £1,966 to £2,064.

16 November: Worrying Outlook For Next 6 Months With 73% Expecting To Be Worse Off 

As the cost of living crisis^[47] continues to grip UK households – and inflation has hit a 41-year high of 11.1%^[48] – nearly two-thirds ( 63%) of adults say they feel worse off now compared with six months ago, writes Bethany Garner.

And 73% expect to be financially worse off in six months’ time, according to the latest Health, Wealth & Happiness report from LifeSearch.

The study, which surveyed 3,000 individuals between 6 and 12 October 2022, also found a quarter of respondents (25%) said the cost of living crisis was ‘on their mind daily’.

Keeping up with the cost of energy bills, housing and food were key concerns. More than a third of adults (34%) said they expect they’ll be unable to pay energy bills this winter, while 22% anticipate falling behind with rent or mortgage payments.

A further 34% expect they will struggle to pay for food — rising to 49% of 18 to 34 year-olds. Almost one fifth of respondents (19%) expect to rely on food banks this winter. 

To cut down on energy costs, 38% of respondents say they’re likely to work from the office more often, while 37% plan to install smart meters at home, and 67% will avoid using major home appliances during peak hours. 

To cut their grocery bill, 67% of Brits plan to switch to a more cost effective supermarket, and 46% intend to sell items they own to raise extra cash.

Some respondents are also putting major life events on hold due to concerns over cost, with more than a third (36%) of 18 to 34 year olds delaying having a child due to the cost of living crisis.

Others are putting off buying a home (19%) or making large purchases such as a new car (25%). Christmas spending is also likely to be reined in — respondents expect to spend £76.20 less on the holiday in 2022 compared with 2021.

Despite these cutbacks, almost half of adults (45%) expect to use the ‘majority’ of their savings to keep up with costs this winter — rising to 62% of 18 to 34 year-olds.

A further 12% of respondents say they have taken on debt to make ends meet, while 9% have borrowed money from friends or family.

Nina Skero, chief executive at the Centre for Economics and Business Research, said: “As the UK economy is likely already in a recession, it is very worrying to  see the extent to which people are worried that their own personal circumstances will worsen further in the coming period. 

“The fact that nearly half of Brits (45%) anticipate using all their savings to make ends meet throughout the winter indicates that the cost-of—living crisis may leave economic scarring that will last well beyond the current inflationary spike.”

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4 November: Lenders Pay £12m Compensation To ‘Distressed’ Borrowers

Several unnamed UK lenders will pay out millions of pounds in compensation to customers who were treated unfairly after finding themselves in financial difficulty during the Covid-19 pandemic, according to the UK’s financial regulator, Andrew Michael writes.

In its report, the Financial Conduct Authority (FCA) said it carried out 69 assessments across 65 businesses which highlighted failings in the treatment of distressed borrowers. 

As a result, seven organisations have agreed to pay £12 million in compensation, to be shared among 60,000 borrowers.

The FCA said it will also be closely reviewing a further 40 firms in the coming months “to make sure they are meeting its expectations and to protect customers from harm”.

Part of the FCA review included a survey on how lenders applied debt fees and charges and the measures used to deal with struggling customers.

In another part of the exercise, the FCA said only 15 out of 50 firms it reviewed “sufficiently explored customer’s specific circumstances, which meant repayment agreements were often unaffordable and unsustainable”.

Sheldon Mills, executive director of consumers and competition at the FCA, said: “It’s vital that the sector continues to learn lessons to make sure they support struggling customers.

“We will take action to restrict or stop firms from lending to people if they fail to meet our requirements that customers in financial difficulties should be treated fairly.”

Laura Suter, head of personal finance at AJ Bell, said: “We’re already seeing more people turn to debt to afford rising bills and it’s imperative that those who are struggling to make repayments are offered support and solutions, rather than being left to struggle to pay and ending up in a debt spiral.”

26 October: PM Pulls Plug On Fracking, Backs Renewables And Nuclear

Jeremy Hunt, Chancellor of the Exchequer, has pushed back the government’s medium-term fiscal plan announcement from next Monday, 31 October, to 17 November, writes Andrew Michael.

The event will be upgraded to a full Autumn statement designed to demonstrate stability and engender confidence in the UK’s financial prudence under new prime minister, Rishi Sunak.

Mr Hunt said he and Mr Sunak wanted more time to go through the forecasts pertaining to the economy in general and the public finances in particular.

Mr Hunt said he was willing to make “politically embarrassing” choices and described a “short two-and-a-half week delay” to his statement as the best course of action.

Mr Hunt had drawn up a draft plan to be announced next Monday, ahead of a crucial interest rate-setting meeting of the Bank of England’s Monetary Policy Committee on 3 November.

But the plan will now take the form of a full Autumn Statement, alongside economic forecasts from the independent Office for Budget Responsibility.

In today’s Prime Minister’s Questions, Mr Sunak said decisions on the economy would be taken to protect those most vulnerable, pointing to his role as Chancellor during the Covid crisis of 2020-21, when he was architect of the furlough scheme.

However, he refused to be drawn on whether benefits would increase in line with inflation thanks to the so-called triple lock. He also added no detail as to what support might be provided to households when the current Energy Price Guarantee comes to an end in April 2023.

When quizzed on energy strategy, Mr Sunak said the government was committed to renewable energy and increased use of nuclear power. He appeared to rule out expansion of government-backed onshore wind power in favour of offshore developments.

He also suggested that he would adhere to the Conservative Party manifesto’s commitment to a moratorium on fracking, introduced in 2019, which bans the use of the controversial drilling technique to release natural gas from shale rock.

25 October: FCA Report Finds 7.8 Million Brits Struggling To Keep Up With Bills

As housing, energy and food costs climb,^[49] one in four UK adults say they are experiencing financial difficulties, or would find themselves in difficulty after an unexpected expense, writes Bethany Garner.

According to the Financial Conduct Authority’s Financial Lives Survey, which interviewed UK adults between February and June 2022, 7.8 million Brits are finding it a heavy burden to keep up with bills

The research also found 12.9 million individuals (24%) have low financial resilience, meaning they would experience difficulties if they suffered a financial shock. 

Those living in the UK’s most deprived areas are more likely to be struggling. In the North East of England, 12% of respondents reported financial difficulties. In the North West, the figure was 10%, compared with just 6% in the more affluent South East and South West of England.

A survey by Nationwide building society suggests consumers spent 7% less in September 2022 than they did in August. 

The research analysed debit card, credit card and direct debit transactions made by Nationwide customers between 1 and 30 September. It revealed a 4% month-on-month drop in spending on servicing debt, suggesting some customers may be falling behind on repayments. 

Nationwide also found a 13% drop in spending on eating out, a 4% drop in retail spending and a 3% drop in spending on subscriptions such as Netflix in September compared with August.

While consumers are cutting back on these categories, spending on essentials increased 9% year-on-year, driven largely by motor fuel and housing costs. 

In September 2022, consumers spent 12% more on motor fuel and electric vehicle charging, 11% more on mortgage payments and 8% more on rent than they did in September 2021.

Mark Nalder, payments strategy director at Nationwide, said: “The likelihood is that the downturn in spending is likely to continue as people tighten their belts now to prepare themselves for the Christmas period, either so they have sufficient to spend, something to save or in some cases enough to get by.”

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25 October: Housing Costs Add To Nation’s Financial Woes

Almost half of UK adults are struggling to pay their energy bills, according to the ONS Opinions and Lifestyle Survey released today, writes Jo Groves.

The proportion of adults finding it difficult to afford their energy bills has continued to rise from 40% (March to June) to 45% in the last three months. A similar picture was revealed for rent and mortgage payments, with 30% of adults struggling to pay their housing costs, compared to 26% in the previous quarter. 

Rising interest rates and energy costs are likely to be at the top of new Prime Minister Rishi Sunak’s to-do list as the UK grapples with a cost-of-living crisis. All eyes will also be on the energy price guarantee scheme, which was shortened to April 2023 under Liz Truss’s government.

The ONS survey also revealed a marked disparity in the impact of higher energy and housing prices across households:

• 55% of disabled adults reported they were struggling to afford their energy bills, compared to 40% of non-disabled people. 
• 36% of disabled adults found it a challenge to afford rent or mortgage payments, compared to 27% of non-disabled people.
• Around 7 in 10 adults with prepayment meters struggled to pay their bills, compared with 4 in 10 adults paying their bills by direct debit or monthly payments.
• 6 in 10 renters found it difficult to afford their energy bills, compared to 4 in 10 people with mortgages.
• Nearly 70% of Black adults are struggling to afford their energy bills, compared to almost 60% of Asian adults and 44% White adults. 

According to the recent public opinions and social trends bulletin from the ONS, 93% of adults reported an increase in the cost of living compared with a year ago while nearly 80% reported that their cost of living had increased over the last month.

Over 10% of renters reported being behind on their energy bills, compared with 3% of home-owners with a mortgage and 1% of home-owners who own their home outright. Around 5% of renters were behind on their rent payments, compared to 1% of people with a mortgage.

The ONS attributed this difference to some home-owners having fixed-rate mortgages, while renters were exposed to rent increases.

Looking on a regional basis, adults in the North West and London were more likely to be behind with their energy bills, while almost 40% of adults in London reported they were struggling to pay their rent or mortgage.

Adults in the youngest and oldest age groups were the least likely to be behind on rent or mortgage payments. The ONS pointed to many younger adults not yet being responsible for housing costs, while older people were more likely to own their home outright.

25 October: Sunak Strikes Optimistic Tone Despite ‘Profound Challenges’

Speaking outside 10 Downing Street after being appointed as the UK prime minister earlier this morning, Rishi Sunak has said he would put the UK’s economic stability at the heart of his new government’s agenda, writes Andrew Michael.

Mr Sunak has taken over from Liz Truss, whose 45-day tenure in office included a disastrous mini-Budget in September that sent the markets into a tailspin and saw the pound plunge to a record low against the dollar.

Mr Sunak said that Ms Truss was “not wrong” in her plan to aim for increased growth. But he acknowledged that mistakes were made: “I have been elected as leader of my party and your Prime Minister in part to fix them.”

He added: “Together we can achieve incredible things. We will create a future worthy of the sacrifices so many have made and fill tomorrow and every day thereafter with hope.”

Mr Sunak’s next step will be to announce the members of his Cabinet. It is expected that Jeremy Hunt, who was promoted to the role of Chancellor a week ago by Ms Truss, is likely to retain his job.

Next Monday, Mr Hunt is expected to reveal the details of the government’s medium-term fiscal plan and associated forecasts from the independent Office of Budget Responsibility.

One position that is immediately vacant is that of business secretary, following the resignation today of Jacob Rees Mogg, an avid supporter of Boris Johnson.

As financial markets digest the political turmoil of recent days, yields on government bonds have returned to levels last seen before the mini-Budget, with investors welcoming Mr Sunak’s appointment. The 30-year gilt yield has fallen to 3.68% today.

High yields on gilts already in circulation are bad news for the government because they mean it has to offer competitive, higher rates of interest when issuing new gilts, pushing up its cost of borrowing. This filters through to other rates of interest, which is why mortgage borrowing has become more expensive in recent weeks.

Long-dated gilts have now all but recovered the losses prompted by the mini-Budget’s seismic package of unfunded tax cuts, which required an intervention from the Bank of England to maintain stability in the UK’s financial framework.

24 October: Victory Reduces Upward Pressure On Interest Rates

Rishi Sunak has replaced Liz Truss as the UK’s Prime Minister, less than a day after confirming his intention to stand for the role, writes Andrew Michael.

Mr Sunak, the MP for Richmond in Yorkshire and former Chancellor of the Exchequer, won the race to Number 10 Downing Street after his last remaining rival, Penny Mordaunt, dropped out of the contest to become Conservative Party leader earlier this afternoon (Monday). 

In a televised statement after his victory was confirmed, Mr Sunak said the UK faces “profound economic challenges” that would only be met through “stability and unity”. He said it is his intention to “build a better, more prosperous future for our children and grandchildren.”

Over the summer, despite winning the lion’s share of support among his party’s MPs in the previous leadership contest following Boris Johnson’s resignation, he was foiled when the party’s membership instead voted for Ms Truss.

Mr Sunak now takes over from Ms Truss, who resigned from the role just 45 days into the job following her government’s disastrous mini-Budget, which brought turmoil to the financial markets and saw the pound plunge to its lowest-ever value against the dollar.

Mr Sunak’s appointment appeared to soothe the markets, with government bonds – or gilts – rallying on today’s news. The 10-year benchmark gilt yield fell nearly a quarter of a percentage point on Monday to trade at 3.82%, reflecting a sizeable rise in the price of bonds. The pound was also trading higher against the dollar at around $1.14 

The combined effect has been to lessen interest rate rise expectations, potentially easing upwards pressure on mortgage rates. 

Edward Park, chief investment officer at Brooks Macdonald, said: “Lower gilt yields will reduce the borrowing costs of the UK government and a new fiscal outlook may allow the Bank of England to be less aggressive with their interest rate policy.”

As with his predecessor, Mr Sunak will be confronted by a deepening cost-of-living crisis, fuelled by eye watering levels of inflation caused by soaring energy costs as well as the war in Ukraine.

With two years as Chancellor under his belt, a period that coincided with the Covid-19 pandemic, Mr Sunak has already given the City of London and financial watchers a flavour of how he might run the country.

He takes the challenges posed by inflation seriously and is widely considered to be fiscally conservative. In other words, he is keen to rebalance the nation’s books. 

This tendency differs from that of his predecessor, Liz Truss, whose growth strategy imploded within weeks of the announcement of enormous, unfunded tax cuts announced in September’s mini-budget. 

Fiscal prudence

If Mr Sunak is to achieve his preference for fiscal prudence, a period of belt-tightening appears inevitable – either through tax rises, government cost-cutting, or both.

At the weekend, Lord Mervyn King, former governor of the Bank of England, warned that the UK faced a “more difficult” era of austerity than the one after the 2008 financial crisis. He added that the average person could face “significantly higher taxes” to fund public spending.

Mr Sunak will be keen to deliver on his previous promises of fiscal responsibility. He must balance this, however, with the appropriate support if he is to restore the public confidence.

The first big test for Mr Sunak will come next Monday, when his government will reveal its medium-term fiscal plan and the associated forecast from the Office of Budget Responsibility. At the time of writing, Mr Sunak is expected to retain Jeremy Hunt as his Chancellor.  

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘’Gone are the days when Rishi Sunak was prepared to open up the government coffers to see the UK through a crisis. The pandemic spending spree is well and truly over and the former Chancellor will take the top job in the guise of a strict and austere headteacher.

“He will be determined not to see the bond market run amok again, threatening the country’s financial stability. He will also want to show he is cooperating with the Bank of England by being ultra conservative fiscally in a bid to tame high inflation.”

Market stability

Andrew Megson, CEO of My Pension Expert, said: “An incredible amount of chaos has ensued in the six weeks since Rishi Sunak’s failed first attempt to become Prime Minister. Now, he has the chance to prove himself, in the biggest way possible, by extinguishing the fires set alight during Truss’ 45-day reign of market crashes and embarrassing U-turns.

“Market stability will be a priority. Sunak’s first leadership campaign was led on a promise of fiscally conservative policies, which has already pleased the markets and given the pound a boost. However, it’s also crucial that the new PM focuses on immediate reassurances for Britons struggling to stay afloat amid a soaring cost-of-living crisis. Confirming his stance on key policies such as the triple lock, or benefits cuts, would be a step in the right direction.”

Sam North, market analyst at eToro, said: “With Rishi Sunak in charge there will be less pressure on the Bank of England to raise interest rates as aggressively, thanks to lower yields causing less of an incentive for traders to dump gilts. The pound will push higher due to less uncertainty, too. But with the news of his appointment already priced in, investors shouldn’t expect a big move following the announcement.”

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20 October: Mortgages, Energy Bills, Pensions And Benefits Hang In Balance As PM Resigns

Serving as Prime Minister has, until recently, been the pinnacle of British public life – a golden goblet from which the individual supped the honeydew of political immortality. Now it seems like a poisoned chalice – and a tarnished one at that, writes Kevin Pratt.

As a previous PM once noted, all political careers end in failure. But Liz Truss’s calamitous period in office will secure a place in the history books for the velocity with which errors were made and then compounded, and the scale of the damage caused.

To be fair to Liz Truss, she came to power against a backdrop of global economic turmoil. But she and her allies rapidly contrived to make things even worse by clumsily spooking the currency and bond markets and destroying the UK’s economic credibility overnight.

This doesn’t even qualify as a political statement. The pace and number of recent Treasury u-turns are an admission that mistakes were made, as was the decision to sack a Chancellor specifically chosen to bring the Prime Minister’s policies into being.

So what does all this mean for household finances?

In the context of the cost of living crisis, three issues leap out: interest rates and the cost of mortgages^[50], the Energy Price Guarantee^[51] (EPG), and the pensions and benefits ‘triple lock^[52]’.

Mortgages

Interest rates are set by the Bank of England and are not in the gift of the Prime Minister or his or her Chancellor. But a government’s economic policies – such as large-scale unfunded tax giveaways à la Kwasi Kwarteng’s ill-starred mini-Budget on 23 September – make money markets edgy. And when they feel edgy, they demand higher returns to lend money.

The impact of this is felt far and wide, not least in higher mortgage payments (and, inevitably, rents), as banks and building societies fork out more to secure long-term funding. It remains to be seen how markets will digest the news of today’s resignation.

Energy bills

As far as energy bills are concerned, Ms Truss hailed the EPG as a huge achievement, and no-one can argue that urgent action was required to shield households from soaring costs. But Mr Kwarteng’s successor as Chancellor, Jeremy Hunt, has pulled funding for the guarantee from next April when it was due to run until October 2024.

What comes after it ends, no-one yet knows. The whole issue will be reviewed and we can expect action to help those deemed most in need. But who will qualify, and what help they’ll get, remains to be seen.

Pensions

The triple lock is designed to protect the spending power of State pensions and benefits by ensuring they increase by the highest of three measures: September’s annual inflation rate, average earnings, or 2.5%. The inflation number is by far the highest at a whopping 10.1%.

Ms Truss said only yesterday that the lock, expensive though it will prove, will remain in place, at least for pensions, and she added that the Chancellor was in agreement. But she’s gone, and who knows who will be Chancellor next week? Mr Hunt has ruled himself out of the race to be PM this time round, preferring to remain as Chancellor. But, of course, there’s no guarantee the new incumbent at Number 10 Downing Street would want to keep him as a neighbour at Number 11.

That potentially puts the triple lock back in play as a possible source of reduced expenditure for the next iteration of the Conservative government.

The sum of all this? Deep uncertainty and anxiety for millions of households. Major outgoings such as housing costs are high and getting higher, bills are rocketing, and supermarket shops are becoming more expensive by the week.

Ms Truss’s successor will no doubt assume the role brim full of optimism and confidence, but the challenges will be immediate and massive, and a lot more than their personal political legacy is at stake.

17 October: Chancellor Tells Commons Of Severe Economic Challenges

Jeremy Hunt, the Chancellor of the Exchequer, has announced the creation of a body that will provide the government with independent expert advice on economic matters, writes Andrew Michael.

The Chancellor announced the formation of a new, four-person economic advisory council as part of a follow-up address to the House of Commons, having reversed a substantial proportion of last month’s mini-Budget earlier today.

This included a decision to scrap “indefinitely” a planned reduction in the basic rate of income tax by 1p to 19p next April and also to cut short both the Energy Price Guarantee (EPG) and Energy Bill Relief Scheme aimed at supporting UK households and businesses through the energy crisis (see full story below).

No details have been forthcoming about the levels of support that might be provided from April onwards when the EPG ends, nor how people or businesses will qualify for assistance.

Cornwall Insights, the market analyst, has said average annual bills could top £4,300 once the EPG comes to an end in the Spring under Mr Hunt’s direction. Under the EPG, an average-consumption household would pay around £2,500 a year for the next two years, starting this month.

Outlining his plans for a new economic advisory body, Mr Hunt told MPs: “I want more independent expert advice as I start my journey as Chancellor.”

The Chancellor said the panel would include Rupert Harrison, a top aide to the former Conservative Chancellor, George Osborne, plus two former Bank of England Monetary Policy Committee members, Gertjan Vlieghe and Sushil Wadwhani. Karen Ward, chief market strategist EMEA at JP Morgan Asset Management, completes the line-up.

Explaining his actions to provide a financial statement and his decision to address the nation this morning, instead of waiting until 31 October – a date that had already been brought forward by three weeks – Mr Hunt said it was important for the government to “do more, more quickly to give certainty to the markets.”

He added: “I want to be completely frank about the scales of the economic challenge we face. We have had short term difficulties caused by the lack of an Office for Budget Responsibility forecast alongside the mini-Budget.

“But there are also inflationary and interest pressures around the world. Russia’s unforgiveable invasion of Ukraine has caused energy and food prices to spike. We cannot control what is happening in the rest of the world, but when the interests of economic stability means the government needs to change course, we will do so and that is what I have come to the House to announce today.”

The pound rose against the dollar to $1.14 as Mr Hunt outlined his plans to MPs. On the stock market, the FTSE 100 index of leading UK companies rose by 0.9%.

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17 October: Axe Falls On ‘Trussonomics’ As Energy Bill Help Chopped

Jeremy Hunt, installed as Chancellor of the Exchequer last Friday, today axed all but two of the measures contained in his predecessor Kwasi Kwarteng’s 23 September mini-Budget.

Mr Hunt is also cutting short the Energy Price Guarantee (EPG) and Energy Bill Relief Scheme (EBRS) aimed at UK households and businesses. These were announced by Prime Minister Liz Truss when she took office earlier last month.

The EPG was due to run for two years but will now only run until April 2023. The EBRS, which was to run until 31 March 2023, may have been extended if a review found more support was required at that point.

Among the measures announced by Mr Hunt is the scrapping of the planned reduction in the basic rate of income tax by 1p to 19p next April. The Chancellor said the basic rate will remain at 20p “indefinitely”.

The Chancellor said that plans to cut dividend tax by 1.25 percentage points, also from next April, are also being shelved. According to the Treasury, the combined saving from these two latest tax U-turns amounts to around £7 billion a year.

Mr Hunt also said that plans to repeal reforms to off-payroll working rules – also known as IR 35 rule changes – would be scrapped.

Also being shelved is a previously planned freezing of alcohol duty rates that was due to take place from 1 February next year. The Treasury added that plans to introduce a new VAT-free shopping scheme for non-UK visitors to Great Britain were also being junked.

A 1.25 percentage point cut to National Insurance Contributions from next month has been maintained, as have changes to the Stamp Duty regime in England and Northern Ireland.

Explaining his decision to overhaul the energy support programme, the Chancellor said that it would be irresponsible of the government to “continue exposing the public finances to unlimited volatility in international gas prices”.

He added that a Treasury-led review will be launched to consider how to support households and businesses with their energy bills from April 2023 onwards.

Today’s announcements come in the wake of several significant reversals of policy that themselves were only announced in the mini-Budget.

Last week, the government said it was reversing one of the key planks of the mini-Budget – a plan to stop the increase in corporation tax next April from 19% to 25%. This will now go ahead.  On the same day, plans to remove the additional 45p in the pound rate of income were also junked.

The Treasury estimates that the savings made from these two measures come to £32 billion a year.

Mr Hunt said he had taken today’s decisions to ensure the UK’s economic stability and to provide confidence in the government’s commitment to fiscal discipline: “The government is prepared to act decisively and at a scale to regain the country’s confidence and trust.”

But Mr Hunt went on to warn that “there will be more difficult decisions to take on both tax and spending”.

As a result, government departments will be asked to find efficiencies within their budgets. The Chancellor will reveal further changes to fiscal policy on 31 October.

Market reaction

Jason Hollands, managing director of Bestinvest, said: “After recent u-turns over the abolition the 45p tax band and the halting of corporation tax rises, the new Chancellor of Exchequer has this morning comprehensively ripped-up the Prime Minister’s fiscal policy in a concerted effort to placate the angry gods of the bond markets and restore the UK Government’s battered credibility for fiscal discipline.

“These measures – which bring an abrupt end to the Truss economic experiment – have helped to placate debt markets with gilt yields falling back today. But with real incomes being squeezed, much higher business taxes now coming next year, and the burden of personal taxes set to rise as allowances are frozen too, the growth outlook for the UK remains very challenging in the near term with a recession on the way.”

Victoria Scholar, head of investment at interactive investor said: “Jeremy Hunt’s focus on reassuring the markets and reinstating confidence appears to have worked so far with gilt yields trading lower and sterling pushing higher. The FTSE 100 is staging gains with utilities and housebuilders – the most budget-sensitive sectors – outperforming, as Trussonomics is unwound with the reversal of the biggest tax cuts in 50 years.”

17 October: Additional U-Turns Expected After Kwarteng Dismissal

Jeremy Hunt, appointed to replace Kwasi Kwarteng as Chancellor of the Exchequer on Friday, will today make statements and address the House of Commons on the government’s financial plans.

The Chancellor is expected to continue the process of rowing back on pledges made in the so-called mini-Budget on 23 September, which threw markets into turmoil, sending sterling to its lowest ever level against the US dollar and causing a crisis on gilt markets which has fed through into a steep increase in the cost of mortgage borrowing.

Markets have been concerned about the lack of detail attaching to the initial tax-cutting measures and proposed funding for growth. Mr Hunt will attempt to demonstrate a new approach to financial rigour and responsibility.

In a notice issued earlier this morning, the Treasury said: “The Chancellor will make a statement later today, bringing forward measures from the Medium-Term Fiscal Plan that will support fiscal sustainability.

“He will also make a statement in the House of Commons this afternoon [expected at 3.30pm].

“This follows the Prime Minister’s statement on Friday, and further conversations between the Prime Minister and the Chancellor over the weekend, to ensure sustainable public finances underpin economic growth.

“The Chancellor will then deliver the full Medium-Term Fiscal Plan to be published alongside a forecast from the independent Office for Budget Responsibility on 31 October.

“The Chancellor met with the Governor of the Bank of England and the Head of the Debt Management Office last night to brief them on these plans.”

After sacking Kwasi Kwarteng on Friday, Liz Truss, Prime Minister, reversed one of the key planks of the mini-Budget – a plan to stop the increase in corporation tax next April from 19% to 25%. This will now go ahead.

Mr Kwarteng had previously scrapped plans to abolish the additional 45p rate of tax following widespread criticism.

Mr Hunt may choose to delay the proposed cut in the basic rate of income tax, from 20p to 19p, which was due to take effect from April. Another possible reversal is the proposed exemption to VAT of overseas tourists to the UK.

The changes to National Insurance Contributions scheduled for next month – which will reverse increases announced earlier this year by Rishi Sunak, when he was Chancellor – are expected to proceed.

14 October: £18bn Increase ‘Down-payment’ For Growth Plan

Liz Truss, Prime Minister, has reversed the decision made in the mini-Budget of 23 September not to raise corporation tax next April, as planned by the previous Conservative administration under Boris Johnson.

Speaking this afternoon, she said the increase from 19% to 25% will now proceed next year, with the £18 billion raised acting as a “down-payment” on the government’s medium-term fiscal plan for growth.

Much of the market turmoil seen in recent weeks has resulted from the plan, as announced on 23 September, being unfunded.

Corporation tax is paid by companies on their trading profits and any profits arising from investments and the sale of assets. The ‘small profits’ rate of corporation tax will be maintained, meaning smaller or less profitable businesses will not pay the full 25% rate, with those with less than £50,000 profit continuing to pay 19%.

The full details of the fiscal discipline that will support the plan for tax cuts and investment will be provided on 31 October by Jeremy Hunt, who was appointed Chancellor earlier today following the dismissal of Kwasi Kwarteng.

Mr Hunt’s forecast will be accompanied by a report from the independent Office for Budget Responsibility.

Today’s corporation tax u-turn follows the retreat by Mr Kwarteng earlier this month when he abandoned plans to remove the 45 pence additional rate of tax – another controversial plank of his mini-Budget.

Ms Truss says she remains committed to creating a low tax, high wage and high growth economy with reduced levels of government debt and a more efficient public sector. She said that levels of public spending will grow at a slower rate than previously planned.

The pound bounced back against the dollar after dipping below $1.12 as currency markets digested the Prime Minister’s press conference.

On the stock market, the FTSE100 index of leading UK shares was up 1.7% on the day at 6967.

Jason Hollands, managing director of Bestinvest, commented on the changes: “Businesses and investors do not like instability and uncertainty but the retreat on corporation tax at least signals to the bond markets that the government is responding to concerns about fiscal discipline.

“The move to keep the corporation tax hike in April 2023 – the policy set out at the last full Budget – seems to be a tactic to appease bond markets with some fiscal balancing, while at the same time trying to retain tax-cutting credentials in terms of personal taxation.

“We still have an autumn fiscal statement on 31 October, but it seems unlikely given the chastening experience of the last three weeks that it will contain anything new or ambitious.”

Matthew Amis, investment director, abrdn said: “It feels like more chapters are still left in this story but, for the time being, financial markets and, particularly, the gilt market can take a deep breath and calm down a touch. This should allow the Bank of England to step away from gilt buying on Monday as planned and increases the prospects of quantitative tightening starting in a few weeks’ time.

“Gilt yields have rallied significantly in the last two sessions, which makes sense. However, the pressure is still for gilt yields to edge higher from here, albeit with less volatility. The Bank will still need to hike [interest rates] aggressively in the next few months and the gilt market will still need to absorb extremely high levels of gilt supply.

“However with ‘Trussonomics’ filed away under the heading ‘disaster’, we can hopefully get back to a functioning gilt market.”

14 October: Truss To Explain Strategy This Afternoon

Former health secretary Jeremy Hunt has been appointed Chancellor of the Exchequer after Kwasi Kwarteng was sacked from the role by Prime Minister, Liz Truss, having lasted just 38 turbulent days in the office, writes Andrew Michael.

The appointment comes as Ms Truss prepares to announce significant changes to her government’s recent mini-budget that caused turmoil on the markets, the pound fall to a record low against the dollar, and a fire sale of UK pension fund assets worth billions of pounds.

Earlier this summer, Mr Hunt ran against Ms Truss in the Conservative Party leadership contest, but was ejected from the process early on having failed to secure enough support from fellow MPs.

Mr Hunt had previously lost out to Boris Johnson in the final round of the 2019 Conservative Party leadership contest.

12 October: One-In-Five Homes Delay Switching On Heating

Just 21% of UK households have switched on their central heating since the end of summer this year, writes Bethany Garner, in a bid to stave off higher energy costs.

And, as households continue to grapple with the rising cost of living^[53], almost one-in-five (18%) households intend to delay switching on their heating until December — two months later than usual — while 22% say they will only use it on rare occasions.

More than three quarters (78%) said they will wear warmer clothing and ‘extra layers’ around the house rather than use their central heating, the survey found. 

Householders also expect to use their heating more conservatively than in previous years with a quarter of respondents (25%) planning only to heat specific rooms. 

Nationwide gathered a total of 4,078 responses between 12 and 15 August, and between 30 September and 3 October. 

The report coincides with the government’s Energy Price Guarantee^[54] which took effect on 1 October. While the guarantee ensures that a typical-use UK household will pay no more than £2,500 a year for their energy bills, this is still £529 higher than under the previous price cap.

Mandy Beech, director of retail services at Nationwide, said: “This poll shows how stretched many are becoming, even considering the government’s energy price cap, with people having to think carefully about when, and in what rooms, they turn their heating on.”

Households cutting back on food

The drive to save on energy is part of a wider cost-cutting trend sparked by the cost of living crisis, with 81% of the households Nationwide surveyed planning to reduce their spending in some way. 

Food was a key area for saving, with almost half of respondents (48%) reporting they have cut back on eating out and takeaways, 40% spending less on supermarket fresh meat, 27% buying fewer fresh fruits and vegetables and 33% changing where they shop for groceries.

In other spending areas, a further 36% say they are using their car less, while 33% are cutting back by mending clothes rather than buying new.

Limited savings cushion

Almost a third of people (32%) have been unable to save any money since April while a further 40% have managed to save a maximum of just £300.

In the absence of an adequate savings cushion, there is a risk that households may turn to borrowing to make it through the winter. 

Nationwide’s research found that 20% of households would consider using a credit card to cover rising energy costs, while a further 15% said they would consider using a personal loan.

Ms Beech added: “Now more than ever, we would encourage anyone who is struggling financially to speak to their financial services provider.”

Back in August Nationwide launched a cost-of-living hotline for customers worried about their finances.

10 October: Chancellor To Reveal In-Depth Assessment Of The UK’s Finances This Halloween

Kwasi Kwarteng, the Chancellor of the Exchequer, has brought forward his debt-cutting fiscal plan – and accompanying official forecasts – by more than three weeks, Andrew Michael writes.

Mr Kwarteng, architect of the UK government’s recent mini-Budget that prompted a period of stock market turmoil and the pound falling to a record low against the dollar, had promised to publish a medium-term fiscal plan on 23 November 2022.

But with the Chancellor under pressure to act faster, the plan’s contents – which are due to show how he will set the UK’s debt on a downward path within five years – will now be published on 31 October.

The new fiscal plan will be judged by the independent Office for Budget Responsibility (OBR) on the same day, with its verdict eagerly expected by the financial markets.

In September, amid a raft of announcements including giving the green light to fracking as a means of viable UK energy production, the mini-Budget included proposals for unfunded tax cuts worth £45 billion.

A decision to scrap the 45p in the pound additional income tax rate for high earners was subsequently scrapped.

But the mini-Budget’s overall effect not only prompted a run on the pound, it also forced an intervention by the Bank of England to maintain financial stability within the government bond markets.

In a letter to Mel Stride MP, chair of the Treasury Select Committee, Mr Kwarteng said the new date of 31 October would allow the OBR, which checks the government’s financial plans, “to capture data releases, such as the recent quarterly national accounts.

“It will allow for a full forecast process to take place to a standard that satisfies the legal requirements of the Charter for Budget Responsibility enacted by Parliament and that also provides an in-depth assessment of the economy and public finances.”

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4 October: Regulator Punishes Firms For Pollution And Supply Failings

Customers of 11 water companies will have their bills reduced by £150 million after their suppliers failed to hit performance targets, writes Candiece Cyrus.

Ofwat, the market regulator, found 11 of 17 water companies across the UK missed targets for water supply interruption, pollution incidents and sewer flooding for the year 2021/22. There have been widespread reports in recent months of pollution in UK rivers and on stretches of coastline.

The summer also saw the Environment Agency announce that the performance of England’s nine water and sewerage companies had fallen to its lowest level since its assessments began in 2011, prompting it to call for action such as higher fines for deliberate pollution.

The lion’s share (£80 million) of the £150 million penalty will be returned to the customers of the two worst-performing companies, Thames Water and Southern Water. 

Better performing companies, such as Severn Trent Water, which exceeded their targets, will be able to increase their customers’ bills. Taking into account the amount better performing companies will add to their customers’ bills (£97 million), the net loss to the water industry will be £53 million in reduced bill payments.

However, Ofwat says all 17 water companies will be able to increase bills by the rate of inflation as measured by the Consumer Prices Index including owner occupiers’ housing costs (CPIH), thus offsetting any reduction. In August, the annual rate of CPIH stood at 8.6%. 

Households should expect the changes to their bills in 2023-24.

Water company Amount to be taken off/addedto customer bills to punish/reward supplier Affinity Water Reduced by £800,000 Anglian Water Reduced by £850,000 Bristol Water Increased by £600,000 Dŵr Cymru Reduced by £8 million Hafren Dyfrdwy Reduced by £400,000 Northumbrian Water Reduced by £20.3 million Portsmouth Water Increased by £800,000 SES Water Reduced by £300,000 Severn Trent Water Increased by £62.9 million South East Water Reduced by £3.2 million South Staffs Water Increased by £3 million South West Water Reduced by £13.3 million Southern Water Reduced by £28.3 million Thames Water Reduced by £51 million United Utilities Increased by £24.1 million Wessex Water Increased by £4.4 million Yorkshire Water Reduced by £15.2 million Source: Ofwat

David Black, chief executive of Ofwat said: “When it comes to delivering for their customers, too many water companies are falling short, and we are requiring them to return around £150 million to their customers. 

“We expect companies to improve their performance every year. Where they fail to do so, we will hold them to account. 

“All water companies need to earn back the trust of customers and the public and we will continue to challenge the sector to improve.” 

Warren Buckley, customer experience director at Thames Water which has 15 million customers, said: “Last year we saw a significant reduction in total complaints to the business following improvements to our customer service as well as a 39% reduction in supply interruptions in the last two years. 

“We can confirm that the financial penalties incurred will be refunded to customers as part of their normal bills and set out clearly on the bills. Adjustments to household bills will be announced next year.

“We’re determined to do better, and while we’re heading in the right direction, we know there is a long way to go.”

Water companies must meet shared and individually tailored yearly targets. They were last set at the most recent price review in 2019, and will remain in place up until the next price review in 2025.

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3 October: Kwarteng Bows To Pressure Ahead Of Conference Speech

Kwasi Kwarteng MP, Chancellor of the Exchequer, has taken to Twitter to announce a reversal to a key element of last month’s mini-Budget – the abolition of the additional rate of tax of 45p for those earning £150,000 a year will not now take place.

Mr Kwarteng is due to address the Conservative Party conference in Birmingham later today.

In his social media statement, Mr Kwarteng said: “It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country.

“As a result, I am announcing that we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened.”

A number of senior Tory MPs including former ministers Michael Gove and Grant Shapps have been highly critical of the proposed abolition, heaping pressure on the Chancellor and Liz Truss, Prime Minister, who was advocating the measure as recently as yesterday.

26 September: Update On Fiscal Statement Accompanies Bank Bid To Cool Markets

Following the ‘mini-Budget’ fiscal statement on Friday 23 September by Kwasi Kwarteng, Chancellor of the Exchequer, the Treasury today issued an explainer setting out how the government’s controversial Growth Plan will be realised, writes Kevin Pratt.

The news came on the same afternoon as a statement by Andrew Bailey^[55], governor of the Bank of England, saying that the Bank is monitoring the volatile performance of sterling on international currency markets, and that its Monetary Policy Committee will not hesitate to raise interest rates to control inflation at its next scheduled meeting on 3 November.

There had been speculation that the Bank would be forced into unscheduled emergency action to prop up the pound after it took a battering in Asian markets and hit a 50-year low against the US dollar on Monday morning.

Taken together, the statements from the Treasury and the Bank look like a concerted effort to calm markets, with commentators concerned that negative reaction to Friday’s statement is having a deeply damaging effect on the UK economy.

The Treasury says ministers will announce detailed measures in October and early November, including changes to the planning system, business regulations, childcare, immigration, agricultural productivity, and digital infrastructure.

In October, the Chancellor will outline regulatory reforms to ensure the UK’s financial services sector remains globally competitive. On Friday, he raised hackles in some quarters by abolishing the cap on banker bonuses (see coverage below).

There will be another statement from Mr Kwarteng – dubbed a Medium-Term Fiscal Plan – on 23 November. This will set out further details of the government’s rules for managing its finances, including ensuring that debt falls as a share of gross domestic product in the medium term.

The government has stated it will stick to departmental spending settlements for the current spending review period.

The Chancellor has told the Office for Budget Responsibility (OBR) to provide a full forecast for the nation’s finances to accompany this statement.

There will then be a full-blown Budget in the Spring, with a further OBR forecast.

Mr Kwarteng responded to criticism of his Friday statement by doubling down on his tax-cutting agenda, saying that further changes would be made to the tax regime in a bid to stimulate growth at a trending rate of 2.5% per annum.

23 September: Chancellor Promises ‘New Approach For New Era, Focused On Growth’ In Controversial Mini-Budget

Increases to Stamp Duty allowances and cuts to income tax featured prominently in today’s fiscal statement by Kwasi Kwarteng MP, Chancellor of the Exchequer.

He also confirmed the package of measures designed to reduce the impact of rising energy bills^[56] for households and businesses. He said the action to control prices would cost £60 billion over six months.

Yesterday, the Treasury released details of how the increase to National Insurance Contributions (NICs) imposed earlier this year will be reversed from 6 November. And the planned introduction of an income tax levy to fund health and social care in April 2023, which would have replaced the temporary NICs hike, will no longer happen (see story below).

Mr Kwarteng said the government will pursue economic growth at an annual rate of 2.5%, saying the government is adopting “a new approach for a new era”. Growth in the second quarter of 2022 was minus 0.1%, and yesterday the Bank of England^[57] said Q3 growth is also likely to be negative.

Two successive quarters of negative growth is taken to signal a recession.

To fuel growth, the government is proposing almost 40 new low-tax investment zones across England, and says it will work with devolved authorities in Scotland, Wales and Northern Ireland, to extend the scheme across the country.

The planned increase in Corporation Tax from 19% to 25%, slated for April 2023, has been pulled. The Chancellor said the move will ensure the rate will continue to be the lowest in the G20 group of nations.

Mr Kwarteng is also removing the cap on banker bonuses to encourage growth in the financial services sector. The cap says a bonus cannot be higher than twice a banker’s salary without shareholders’ agreement.

Here are other main points from today’s event:

• Basic rate of income tax to fall from 20% to 19% next April, a year ahead of schedule. The move will save someone earning £40,000 around £560 a year
• Additional tax rate of 45% on earnings over £150,000 per annum to be scrapped from April, benefiting an estimated 630,000 taxpayers. Someone earning £200,000 a year will save around £4,300
• Exemption from Stamp Duty in England and Northern Ireland will apply to first £250,000 of property value, up from £125,000
• First-time buyers will be exempt from Stamp Duty on first £425,000, up from £300,000
• First-time buyer property value to be eligible for exemption up from £500,000 to £625,000
• As announced, Energy Price Guarantee will limit average household energy bills to £2,500 per annum for two years from 1 October 2022
• Every household in the UK will receive a £400 discount off their electricity bills between October and March 2023
• Energy Bill Relief Scheme will provide equivalent relief to businesses, charities and public sector organisations such as schools and hospitals
• Planned alcohol duty increases will be scrapped
• VAT-free shopping for tourists to the UK will be introduced via a digital scheme
• Universal Credit will be reformed to encourage recipients to look for paid employment.

Stamp Duty

The Chancellor revealed a package of major cuts to Stamp Duty Land Tax (SDLT)^[58] in England and Northern Ireland with immediate effect. Scotland and Wales have their own property purchase tax regimes.

The SDLT nil-rate band – the threshold below which Stamp Duty does not need to be paid – will be doubled from £125,000 to £250,000. It means that 200,000 more people every year can buy a home without paying any property tax at all, according to Mr Kwarteng.

Given the previous rate of 2% charged between £125,000 and £250,000, it means the maximum that can be saved is £2,500.

First-time buyers, who currently do not pay SDLT on the first £300,000 on homes costing up to £500,000, will see the nil-rate band extended to £425,000 on homes costing up to £625,000.

Rightmove said that, by raising the tax-free threshold to £250,000, 33% of all homes currently for sale on its portal in England will be completely exempt from the property tax, a steep increase from 7%. It says that, within an hour of the announcement, traffic to its website jumped by 10%.

The 3% SDLT loading which applies to the purchase of additional properties such as holiday homes or buy-to-let will remain.

Reaction to today’s SDLT relief announcement has been mixed. Tomer Aboody, director of property lender MT Finance, said: “The Stamp Duty relief will bring the buzz back to the housing market by helping first-time buyers get on the ladder, allowing them to offset the higher cost of mortgages^[59] with the savings.”

But other commentators have warned that the cuts will fuel rising house prices, as sellers add more onto asking prices in the knowledge that buyers are making a saving elsewhere.

Ben Merritt, director of mortgages at Yorkshire Building Society, said: “Instead of focusing solely on tax cuts, it’s crucial we look at finding other solutions specifically for downsizers – those looking to move into smaller properties – to try and stimulate a stunted market.”

The building society’s research showed that, while 19% of homeowners looking to downsize see Stamp Duty as a barrier to moving, almost a quarter (23%) say it’s the insufficient supply of appropriate housing that prevents them from moving.

However the Chancellor said he intends to tackle property supply shortage by ‘increasing the disposal of surplus government land’ on which to build new homes.

Help to Buy – a government scheme which offers an equity-linked loan of up to 20% of the property value to – applies only to new-build properties.

Universal Credit

Mr Kwarteng announced changes to the Universal Credit (UC) scheme designed to encourage more claimants into work. 

The Administrative Earnings Threshold — the amount UC recipients must earn before being moved from the Intensive Work Search regime to the Light Touch regime — is set to be raised from its current value of £355 a month for individuals or £567 a month for couples. 

The new threshold, which builds on an increase already planned for 26 September, will be 15 hours per week at National Living Wage for individuals (approximately £617.50 per month) and 24 hours a week (approximately £988 per month) for couples. It will come into effect from January 2023.

Following the change, roughly 120,000 Universal Credit claimants will be moved into the Intensive Work Search Regime, which requires them to take actions such as attending appointments with a work coach and submitting job applications. If these criteria are not met, claimants’ benefits are cut.

Claimants over 50 are also set to receive additional tailored support provided through job centres, with the aim of boosting earnings prior to retirement.

Pensions

Reforms are to be brought forward that will change the pensions regulatory charge cap — the maximum fee occupational defined contribution pension schemes can charge savers who are in default arrangements. The fee currently sits at 0.75% of funds under management. 

With this reform, the government aims to encourage pension funds to invest in innovative UK businesses while spurring higher returns for savers. 

Alongside charge cap reforms, the newly announced Long-Term Investment for Technology & Science (LIFTS) competition is designed to stimulate further investment in tech businesses. It will provide up to £500 million of support to new funds investing in UK science and technology companies.

Investment zones

The Treasury has issued plans for the introduction of low-tax investment zones across the UK, with 38 locations in England listed so far.

The zones will see planning regulations relaxed, with businesses in the areas set to benefit from lower taxes in an effort to boost investment, industrial growth, employment rates and home ownership.

In relation to the move the Chancellor said: “To support growth right across the country, we need to go further, with targeted action in local areas.

“We will cut taxes. For businesses in designated tax sites, for 10 years, there will be accelerated tax reliefs for structures and buildings and 100% tax relief on qualifying investments in plant and machinery.”

Businesses in these locations will benefit from full Stamp Duty relief for land and buildings for commercial use or residential development. 

The local authorities listed are: 

• Blackpool Council 
• Bedford Borough Council 
• Central Bedfordshire Council
• Cheshire West and Chester Council 
• Cornwall Council 
• Cumbria County Council 
• Derbyshire County Council 
• Dorset Council 
• East Riding of Yorkshire Council 
• Essex County Council
• Greater London Authority 
• Gloucestershire County Council 
• Greater Manchester Combined Authority 
• Hull City Council 
• Kent County Council 
• Lancashire County Council 
• Leicestershire County Council 18. 
• Liverpool City Region 
• North East Lincolnshire Council 
• North Lincolnshire Council 
• Norfolk County Council 
• North of Tyne Combined Authority 
• North Yorkshire County Council 
• Nottinghamshire County Council 
• Plymouth City Council 
• Somerset County Council 
• Southampton City Council 
• Southend-on-Sea City Council 
• Staffordshire County Council
• Stoke-on-Trent City Council 
• Suffolk County Council 
• Sunderland City Council
• South Yorkshire Combined Authority 
• Tees Valley Combined Authority
• Warwickshire County Council 
• West of England Combined Authority 
• West Midlands Combined Authority 
• West Yorkshire Combined Authority.

Business investment

The Chancellor announced further backing for schemes that support investment in start-up businesses and an increase in the Company Share Option Plan (CSOP), which allows firms to offer employees share options.

The schemes, including the Seed Enterprise Investment Scheme (SEIS), offer perks to investors in businesses that are deemed vital to the economy, including tax reliefs. 

From April 2023:

• companies will be able to raise £250,000 in SEIS investment – an increase of 66%
• the cap on gross assets will be increased to £350,000 and the age limit from two to three years to enable more companies to use the scheme
• the annual investor limit will double to £200,000.

This will help the 2,000 companies which use the scheme each year, according to the Treasury.

While changes to similar schemes, the Venture Capital Trusts (VCT) and Enterprise Investment Scheme (EIS), have not yet been outlined, the government said that it ‘sees the value’ in extending these schemes in the future.

The share option plan limit will also double in April 2023, from £30,000 to £60,000 per individual director or employee.

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September 22: Kwasi Kwarteng Reverses NIC Hike, Scraps Health & Care Levy Due Next April

Ahead of Friday’s mini-Budget, the Chancellor has announced that the 1.25 percentage point increase in National Insurance contributions (NICs) introduced last April, and partially reduced in July, will be fully reversed in November.

The government says most employees will receive a cut to their NICs directly via payroll in their November pay. Some will receive it in December or January, depending on their employer’s payroll software.

The NIC payment thresholds which were raised in July to remove 2.2 million lower-paid workers from paying any NICs will remain in place at today’s levels. For people on pay of less than £12,570, this means they will still not pay any tax on their earnings.

The higher NIC rates were due to return to 2021-22 levels in April 2023, when a separate Health and Social Care Levy was due to take effect, adding 1.25% to income tax bills. 

Chancellor Kwasi Kwarteng MP has now pulled the plug on the Levy, which would have raised £13 billion annually. However, he has said funding for health and social care services will be protected and will remain at the same level as if the Levy were in place.

The costs will be met from general taxation.

The government says that, taken together, the changes will mean almost 28 million people will pay £135 less this tax year and £330 less in 2023/24, with 920,000 businesses saving an average of £10,000 in 2023 as they will no longer pay a higher level of employer National Insurance.

The Chancellor’s statement tomorrow – dubbed his ‘growth plan’ – is expected to confirm that increases to dividend tax rates will be scrapped from April 2023. 

Income tax on dividends was increased by 1.25 percentage points in April 2022 so that those receiving dividend income also helped fund health and social care. Removing the increase will, says the government, save those who pay tax on dividends an average of £345 next year.

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16 September: More Households Feeling Squeeze As Costs Rocket

A survey of 4,963 households the Office for National Statistics has confirmed that 90% of Brits are seeing their cost of living increase, with four in five adults worried about the impact of higher bills.

The survey, covering the period 31 August to 11 September, found:

• 87%) adults reported that their cost of living had risen over the past month (91% in the previous period, 17 to 29 August)
• when the question was first asked in November 2021, the figure was 62%
• 82% adults reported being very or somewhat worried about rising costs of living 81% in the previous period)
• when the question was first asked in April 2022, the figure was 74%
• 48% of adults who pay energy bills found it very or somewhat difficult to afford them (45% in the previous period)
• 29% of adults reported that they found it very difficult or difficult to pay their usual household bills in the last month compared with a year ago, while just over 21% stated this was very easy or easy.
• 26% of adults reported being unable to save as much money as usual when asked about how their household finances have been affected in the past 7 days.

The main reasons reported for the rise in the cost of living were:

• increased price of food shopping (95%)
• higher gas or electricity bills (78%)
• the higher price of fuel (71%).

The ONS, the UK’s official data-gatherer, also asked the survey sample about the ways their household finances have been affected in the past seven days. It found:

• 26% reported being unable to save money as usual 
• 18% stated that they had to use savings to cover living costs
• 17% said they had less money available to spend on food
• 17% reported their savings value is being affected by economic instability.
• 35% of adults reported that their household finances had not been affected in the past 7 days.

On Friday 23 September, Kwasi Kwarteng MP, Chancellor of the Exchequer, will deliver a mini-Budget setting out how the government plans to tackle the cost of living crisis in general and the impact of rising energy bills in particular.

More detail is expected on the Energy Price Guarantee^[60], announced by the Prime Minister on 8 September, in particular the help to be provided to businesses. We already know that the Guarantee will cap average household bills at £2,500 a year for two years from 1 October.

The Chancellor is also expected to announce a series of tax-cutting measures, including a reduction in national insurance contributions.

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1 August: City Watchdog Bolsters Stance Against Misleading Financial Promotions  

The UK’s financial regulator has finalised tougher rules for the marketing and promotion of high-risk investments, writes Andrew Michael.

Under its new, more robust set of rules, the Financial Conduct Authority (FCA) says that firms approving and issuing marketing material “must have the right expertise”.

The regulator added that firms marketing some types of high-risk investments “will need to conduct better checks to ensure consumers and their investments are well matched”.

According to the FCA, firms also “need to use clearer and more prominent risk warnings”. In addition, certain incentives to invest, such as ‘refer a friend bonuses’, have now been banned.

As part of its Consumer Investments Strategy, the FCA says it wants to reduce the number of people who are investing in high-risk products that do not reflect their risk appetite. In other words, taking out investments that are inappropriate for a certain individual’s financial situation.

Although the FCA warns consumers regularly about the financial dangers of investing in cryptocurrencies, the regulator’s new rules will not actually apply to cryptoasset promotions.

But the FCA said that once the UK government has confirmed in legislation how crypto marketing is to be brought within its remit, it will then publish final rules on the promotion of cryptoassets.

These are expected to follow the same approach as those for other high-risk investments.

FCA director Sarah Pritchard said: “We want people to be able to invest with confidence, understand the risks involved, and get the investments that are right for them which reflect their appetite for risk.”

“Our new simplified risk warnings are designed to help consumers better understand the risks, albeit firms have a significant role to play too. Where we see products being marketed that don’t contain the right risk warnings or are unclear, unfair or misleading, we will act,” Pritchard added.

Nathan Long, senior analyst at the investment platform Hargreaves Lansdown, said: “With a sharp focus on understanding consumer behaviour, the FCA is introducing pragmatic rule changes to clamp down on retail investors buying high risk investments.”

Long added: “The attention has rightly been placed on improving consumer understanding at the point of their decision making.”

29 July: More Protection For Funeral Plan Customers As Regulation Gets Underway 

Companies that offer pre-paid funeral plans will be regulated by the Financial Conduct Authority (FCA) from today, offering greater protection to customers. 

Funeral plans are designed to cover the main costs of cremation or burial, so that your family are not left with the bill after you die. Plans can be paid for upfront, as a lump sum or in monthly instalments of between one and 10 years. 

Regulation will ban firms from cold calling potential customers, and from making commission payments to intermediaries such as funeral directors. 

Providers will also be required to deliver funerals to all customers, unless they pass away within the first two years of taking out the plan, in which case a full refund must be offered.

FCA regulation also brings funeral plans under the Financial Services Compensation Scheme (FSCS), meaning consumers can now claim back their money up to £85,000 if a provider goes bust, while recourse will be available under the Financial Ombudsman Service (FOS) if a customer believes they have not been treated fairly by a provider.

Complaints about issues that occurred prior to FCA regulation can be raised, so long as the provider was registered with the Funeral Planning Authority (FPA) at the time.

Majority of market now regulated

So far, 26 funeral plan providers have been authorised by the FCA, including the UK’s largest providers, Co-Op Funeral Plans Limited and Dignity Funerals Limited. 

These newly-authorised firms account for 1.6 million plans — 87% of the UK market. Providers that have not been authorised have until 31 October 2022 to either transfer plans to an authorised firm, or refund customers. 

Emily Shepperd, executive director of authorisations at the FCA said: “We have worked tirelessly to assess funeral plan providers, under our robust authorisation process. We are pleased that 87% of the market is now under regulation. 

“With our new rules in place, consumers will be better protected when they need it the most.”

The FCA advises customers to check whether their provider has been authorised. If not, they should get in touch with the provider to inquire about their plan.

27 July 2022: FCA Consumer Duty Rules Tighten Protections, End ‘Rip-Off’ Charges

UK regulator, the Financial Conduct Authority (FCA), is introducing rules designed to protect customers from being ripped off and to ensure they are treated fairly and get the support and service they need.

The FCA says its new Consumer Duty “will fundamentally improve how firms serve consumers. It will set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first.”

It will require firms to: 

• end rip-off charges and fees 
• make it as easy to switch or cancel products as it was to take them out in the first place 
• provide helpful and accessible customer support, not making people wait so long for an answer that they give up 
• provide timely and clear information that people can understand about products and services so they can make good financial decisions, rather than burying key information in lengthy terms and conditions that few have the time to read 
• provide products and services that are right for their customers  
• focus on the real and diverse needs of their customers, including those in vulnerable circumstances, at every stage and in each interaction.

Among the effects of the new requirements, which will be phased in from July 2023, will be firms being obliged to offer all customers their best deals, rather than using them to tempt new customers. This rule is already in place for car and home insurance.

The reverse will also be true in that firms will be expected to make their best deals available to new customers.

The Duty is made up of an overarching principle and new rules that will mean consumers should receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it. 

The FCA says the new environment should foster innovation and competition. It says it will be able to identify practices that don’t deliver the right outcomes for consumers and take action before practices become entrenched as market norms. 

Sheldon Mills at the FCA said: “The current economic climate means it’s more important than ever that consumers are able to make good financial decisions. The financial services industry needs to give people the support and information they need and put their customers first. 

“The Consumer Duty will lead to a major shift in financial services and will promote competition and growth based on high standards. As the Duty raises the bar for the firms we regulate, it will prevent some harm from happening and will make it easier for us to act quickly and assertively when we spot new problems.”

6 July 2022: Struggling Households Must Seek Help – As Worse To Come

Households struggling financially as a result of the deepening cost of living crisis^[61], are failing to seek available support due to lack of understanding or feelings of embarrassment.

Worry, shame and fear

According to a report published today by the financial regulator, the Financial Conduct Authority (FCA) and MoneyHelper^[62], a government-back online advice service, 42% of borrowers who had ignored their lenders’ attempt to contact them had done so because they felt ‘ashamed’.

It also found that two-in-five (40%) people who were struggling financially mistakenly thought that talking to a debt advisor would negatively impact their credit file.

Other reasons for failing to address financial problems included doubts about the value of contacting lenders, with 20% believing it would not be of any help, and negative perceptions about the potential outcome – with 18% worried about losing access to existing credit and 16% worried about gaining access to credit in the future.

The FCA urged consumers who are struggling to keep on top of their finances to contact lenders to discuss available options, such as a potential payment plan – and to seek free advice from MoneyHelper.

More than half (52%) of borrowers in financial difficulty waited more than a month before seeking help and, of these, 53% regretted not doing it sooner.

Sheldon Mills, executive director of consumers and competition at the FCA, commented, “Anyone can find themselves in financial difficulty, and the rising cost of living means more people will struggle to make ends meet. 

“If you’re struggling financially the most important thing is to speak to someone. If you’re worried about keeping up with payments, talk to your lender as soon as possible, as they could offer affordable options to pay back what is owed.”

Debt advice charities such as StepChange^[63] or Turn2Us^[64] are also independent and free of charge, and making contact will not damage – or even be visible – on your credit file.

Economic outlook

The FCA’s advice has coincided with a Bank of England report, also published today, which warns that people with high levels of debt will find themselves ‘most exposed’ to further price rises of essential goods such as food and energy – especially if costs continue to climb quicker than expected, or it becomes more difficult to borrow.

The Bank’s Financial Stability Report^[65] found that day-to-day living costs have risen sharply in the UK^[66] and across the rest of the world, while the outlook for growth has worsened.

It points the blame largely at Russia’s illegal invasion of Ukraine; both countries produce significant proportions of the world’s wheat supply, along with other staples such as vegetable oil, resulting in high  food prices and high levels of volatility in the commodity markets.

The Bank said that ‘like other central banks around the world’ it has increased interest rates^[67] to help slow down price rises. However, costs are still soaring with annual inflation – 9.1% for May – at the highest level for 40 years.

Combined with tightening borrowing conditions, repaying or refinancing outstanding debt will become harder, said the Bank. It expects households and businesses to become further stretched in the next few months, while being ‘vulnerable to further shocks’.

Both reports land against the backdrop of a political crisis in which two of the Government’s most senior cabinet members – the Chancellor of the Exchequer, Rishi Sunak and Health Secretary, Sajid Javid – both resigned over lack of faith in the Government’s leadership.

Former education secretary, Nadhim Zahawi has now taken up the reins as Chancellor but will inherit ongoing problems^[68] including soaring petrol, energy and food prices as well as the plummeting value of the pound.

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