[UK] 11 ways the cost of living crisis will hit households in April

[UK] 11 ways the cost of living crisis will hit households in April
09 Mar 2022

April is poised to be a challenging month in the UK as tens of millions face the biggest cost-of-living crisis in decades. Energy bills, rail fares, National Insurance, Council Tax and inflation are steeply climbing while income tax thresholds and childcare help are frozen and free COVID tests cease to be available, Mirror reports.

Wages for teachers and NHS staff, benefits and pensions are all set to rise by less than inflation, leaving people with less disposable income. And those repaying student loans are hit by a 'stealth' rise.

Tory ministers announced a £150 council tax discount this April for people in Band A-D homes in England but it will have little effect on the energy bills price rise, let alone all the other pinches that will be felt as the nation starts paying for the pandemic.

A further £200 “rebate” is really just a loan that must be paid back out of future bills, it will not arrive until October.

The minimum wage for over-25s is rising from £8.91 to £9.50 an hour but it too could be cancelled out by the squeeze.

Here are the eleven changes to be aware of:

1. Energy bills

Regulator Ofgem confirmed the energy price cap will increase to a record £1,971 for a typical household following soaring gas prices.

Around 22million Britons on variable tariffs will be hit with a £693 rise to the average annual bill overnight on April 1.

Those on fixed tariffs will be hit by rises when their fixed-rate period ends.

Rishi Sunak has announced plans to help with costs, which include people living in bands A to D getting a £150 discount on their council tax in England and a £200 "rebate" off energy bills in October. However, Labour has branded Sunak "the loan shark Chancellor" as the "rebate" is effectively a loan that will need to be repaid over five years.

The discount will be clawed back from people’s bills in equal £40 instalments from 2023.

Pressure will build on the Government to act again in October when a second hike is expected. The Chancellor admitted annual bills could rise more than £1,000 this year.

2. National Insurance rise

From April, a £12bn rise in National Insurance will hit working people as the Treasury seeks to cut pandemic backlogs in the NHS and begin funding social care.

It will mean that employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance from April 2022 - from 12 per cent to 13.25 per cent.

A worker on £20,000 a year pays an extra £89 in tax. Someone earning £50,000 will pay £464 more.

People earning under £9,880 a year, or £823 a month, will not have to pay National Insurance or the new levy.

3. Inflation and interest rates

UK inflation has hit 5.5 per cent and Brits are beginning to feel the squeeze as the cost of food, energy and transport rises at the fastest for three decades, meaning the same pound in your pocket buys less bread or fuel. Both are also products that could rise in price further due to the war between oil giant Russia and wheat-producing Ukraine.

Meanwhile, the Bank of England hiked interest rates earlier this month to 0.5 per cent in the first back-to-back increase since 2004. This will mean mortgage rates become more expensive, an overnight rise to the monthly payments for people on standard variable rates.

4. Council tax rise

Most of England’s families will be hit with a painful Council Tax rise of 3 per cent or more in April, Mirror research reveals.

The vast majority of cash-strapped town, city and county halls are imposing the maximum possible hike on April 1.

Of 151 councils that run social care, the Mirror found 89 were planning rises of 2.99 per cent - the maximum normally allowed this year.

And a further 39 planned rises higher than 2.99 per cent, by using allowances that were unused in previous years.

Six of those authorities - Cambridgeshire, Lincolnshire, Sandwell, Oxfordshire, Surrey and Rutland - are set to impose a 4.99 per cent hike.

In Rutland that will raise a Band D bill by £91, wiping out much of a £150 discount that is meant to help pay rising energy bills.

5. COVID tests

From April 1 the vast majority of people must pay if they want a COVID lateral flow test even if they have a cough and fever. Number 10 has said, "spending £2bn a month on free tests is not an effective use of taxpayers’ money at this point".

This has prompted a furious row with Labour, some medics and the Scottish and Welsh governments - which will get no new money if they want to continue free tests.

It’s not known how much lateral flow tests will cost, but No10 is seeking a "regulated market" where each test costs a low single-figure number of pounds. This suggests a box of seven could cost £20-30.

Asymptomatic tests for NHS workers will be made available but not routinely, only as a "surge" effort where there's an outbreak. But they will be available for care home residents. Exact lists of those eligible are being drawn up.

6. Student loans 'stealth tax'

Millions will be forced to pay more on their student loans under what has been branded a “stealth tax rise”. Student loan repayment thresholds will be frozen from April 6 after plans to raise them by 4.6 per cent were scrapped.

Graduates will have to spend more of their disposable income as wages and prices rise with inflation.

The Institute for Fiscal Studies warned the freeze will cost £30k earners £113 a year more than they expected.

IFS senior economist Ben Waltmann said it was “a further hit to real incomes”, adding it “effectively constitutes a tax rise by stealth on graduates with middling earnings.”

It gets worse further in the future. Students starting university next year will begin paying off their loans when they earn more than £25,000 - down from the existing £27,295-a-year threshold. And the length of time to repay their debt will be extended to 40 years, up from 30.

The IFS said this will leave poorer graduates paying £28,000 more over their lifetimes.

7. Income tax goes up

Rishi Sunak chose to freeze income tax thresholds at a time when inflation is climbing at an alarming speed.

People will still pay 20 per cent on earnings over £12,570, and 40 per cent on earnings over £50,270, even if average wages rise.

According to the Commons library, more than a million more people will be paying a higher rate of income tax by 2026.

It will also lead to around 1.2 million more workers having their earnings going over the 40 per cent tax threshold and almost 1.5 million more people will be brought into paying the basic level of income tax.

The Treasury can expect to net £19bn from the move. But, when the impact arrives for Britons, calls from backbenchers for the Government to change course could grow.

8. Real terms cut to welfare and pensions

Benefits like Universal Credit and pension rates will both rise by 3.1 per cent, £10.07 a month and £5.55 a week respectively.

Tory MPs pushed through the plans last month - saying it was in line with inflation.

But it’s only in line with what inflation was last autumn before prices began to soar at an alarming rate.

The pensions triple lock - which would have raised the state pension by more than 8 per cent - was suspended. Many are warning that this will severely exacerbate the cost-of-living crisis for those who are struggling the most. Foodbank use is expected to climb as a result.

9. A real-terms cut to childcare help

Parents on the poverty line will be hit hard by April’s cost-of-living crisis as Tory ministers refuse to raise a crucial childcare allowance - despite soaring inflation.

Parents on Universal Credit can claim back 85 per cent of childcare costs, but only up to a £646.35-a-month cap - which has not changed since 2016 and is not rising in April.

10. Real terms cuts to pay - including for NHS and teachers

Inflation also means that many planned rises to public sector wages - which are due every April - will be wiped out by prices.

Rising prices put huge pressure on the Chancellor to give these vital key workers pay rises above 5 per cent or 6 per cent, to avoid hitting them with a real-terms cut.

But there are already clear signs of the Treasury resisting such big cash rises.

The government has spelt out plans to raise salaries for experienced teachers by only 3 per cent in 2022/23.

Health unions have criticised plans to offer NHS staff in England a “miserly” 3 per cent hike.

11. Rail fares

Rail passengers faced a ticket price "nightmare" as the steepest increases in almost a decade hit on March 1.

According to industry body the Rail Delivery Group, people in England and Wales are set to shoulder the largest hike in rail ticket prices since January 2013 with fares predicted to go up by 3.8 per cent.

Labour described the price hike as "brutal" and campaign group Railfuture has accused Boris Johnson's Government of “stoking the fire of the cost of living crisis” by enabling the increase.

Ministers regulate rises for around half of fares including season tickets on most commuter routes.


Source: Mirror

(Links and quotes via original reporting)

April is poised to be a challenging month in the UK as tens of millions face the biggest cost-of-living crisis in decades. Energy bills, rail fares, National Insurance, Council Tax and inflation are steeply climbing while income tax thresholds and childcare help are frozen and free COVID tests cease to be available, Mirror reports.

Wages for teachers and NHS staff, benefits and pensions are all set to rise by less than inflation, leaving people with less disposable income. And those repaying student loans are hit by a 'stealth' rise.

Tory ministers announced a £150 council tax discount this April for people in Band A-D homes in England but it will have little effect on the energy bills price rise, let alone all the other pinches that will be felt as the nation starts paying for the pandemic.

A further £200 “rebate” is really just a loan that must be paid back out of future bills, it will not arrive until October.

The minimum wage for over-25s is rising from £8.91 to £9.50 an hour but it too could be cancelled out by the squeeze.

Here are the eleven changes to be aware of:

1. Energy bills

Regulator Ofgem confirmed the energy price cap will increase to a record £1,971 for a typical household following soaring gas prices.

Around 22million Britons on variable tariffs will be hit with a £693 rise to the average annual bill overnight on April 1.

Those on fixed tariffs will be hit by rises when their fixed-rate period ends.

Rishi Sunak has announced plans to help with costs, which include people living in bands A to D getting a £150 discount on their council tax in England and a £200 "rebate" off energy bills in October. However, Labour has branded Sunak "the loan shark Chancellor" as the "rebate" is effectively a loan that will need to be repaid over five years.

The discount will be clawed back from people’s bills in equal £40 instalments from 2023.

Pressure will build on the Government to act again in October when a second hike is expected. The Chancellor admitted annual bills could rise more than £1,000 this year.

2. National Insurance rise

From April, a £12bn rise in National Insurance will hit working people as the Treasury seeks to cut pandemic backlogs in the NHS and begin funding social care.

It will mean that employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance from April 2022 - from 12 per cent to 13.25 per cent.

A worker on £20,000 a year pays an extra £89 in tax. Someone earning £50,000 will pay £464 more.

People earning under £9,880 a year, or £823 a month, will not have to pay National Insurance or the new levy.

3. Inflation and interest rates

UK inflation has hit 5.5 per cent and Brits are beginning to feel the squeeze as the cost of food, energy and transport rises at the fastest for three decades, meaning the same pound in your pocket buys less bread or fuel. Both are also products that could rise in price further due to the war between oil giant Russia and wheat-producing Ukraine.

Meanwhile, the Bank of England hiked interest rates earlier this month to 0.5 per cent in the first back-to-back increase since 2004. This will mean mortgage rates become more expensive, an overnight rise to the monthly payments for people on standard variable rates.

4. Council tax rise

Most of England’s families will be hit with a painful Council Tax rise of 3 per cent or more in April, Mirror research reveals.

The vast majority of cash-strapped town, city and county halls are imposing the maximum possible hike on April 1.

Of 151 councils that run social care, the Mirror found 89 were planning rises of 2.99 per cent - the maximum normally allowed this year.

And a further 39 planned rises higher than 2.99 per cent, by using allowances that were unused in previous years.

Six of those authorities - Cambridgeshire, Lincolnshire, Sandwell, Oxfordshire, Surrey and Rutland - are set to impose a 4.99 per cent hike.

In Rutland that will raise a Band D bill by £91, wiping out much of a £150 discount that is meant to help pay rising energy bills.

5. COVID tests

From April 1 the vast majority of people must pay if they want a COVID lateral flow test even if they have a cough and fever. Number 10 has said, "spending £2bn a month on free tests is not an effective use of taxpayers’ money at this point".

This has prompted a furious row with Labour, some medics and the Scottish and Welsh governments - which will get no new money if they want to continue free tests.

It’s not known how much lateral flow tests will cost, but No10 is seeking a "regulated market" where each test costs a low single-figure number of pounds. This suggests a box of seven could cost £20-30.

Asymptomatic tests for NHS workers will be made available but not routinely, only as a "surge" effort where there's an outbreak. But they will be available for care home residents. Exact lists of those eligible are being drawn up.

6. Student loans 'stealth tax'

Millions will be forced to pay more on their student loans under what has been branded a “stealth tax rise”. Student loan repayment thresholds will be frozen from April 6 after plans to raise them by 4.6 per cent were scrapped.

Graduates will have to spend more of their disposable income as wages and prices rise with inflation.

The Institute for Fiscal Studies warned the freeze will cost £30k earners £113 a year more than they expected.

IFS senior economist Ben Waltmann said it was “a further hit to real incomes”, adding it “effectively constitutes a tax rise by stealth on graduates with middling earnings.”

It gets worse further in the future. Students starting university next year will begin paying off their loans when they earn more than £25,000 - down from the existing £27,295-a-year threshold. And the length of time to repay their debt will be extended to 40 years, up from 30.

The IFS said this will leave poorer graduates paying £28,000 more over their lifetimes.

7. Income tax goes up

Rishi Sunak chose to freeze income tax thresholds at a time when inflation is climbing at an alarming speed.

People will still pay 20 per cent on earnings over £12,570, and 40 per cent on earnings over £50,270, even if average wages rise.

According to the Commons library, more than a million more people will be paying a higher rate of income tax by 2026.

It will also lead to around 1.2 million more workers having their earnings going over the 40 per cent tax threshold and almost 1.5 million more people will be brought into paying the basic level of income tax.

The Treasury can expect to net £19bn from the move. But, when the impact arrives for Britons, calls from backbenchers for the Government to change course could grow.

8. Real terms cut to welfare and pensions

Benefits like Universal Credit and pension rates will both rise by 3.1 per cent, £10.07 a month and £5.55 a week respectively.

Tory MPs pushed through the plans last month - saying it was in line with inflation.

But it’s only in line with what inflation was last autumn before prices began to soar at an alarming rate.

The pensions triple lock - which would have raised the state pension by more than 8 per cent - was suspended. Many are warning that this will severely exacerbate the cost-of-living crisis for those who are struggling the most. Foodbank use is expected to climb as a result.

9. A real-terms cut to childcare help

Parents on the poverty line will be hit hard by April’s cost-of-living crisis as Tory ministers refuse to raise a crucial childcare allowance - despite soaring inflation.

Parents on Universal Credit can claim back 85 per cent of childcare costs, but only up to a £646.35-a-month cap - which has not changed since 2016 and is not rising in April.

10. Real terms cuts to pay - including for NHS and teachers

Inflation also means that many planned rises to public sector wages - which are due every April - will be wiped out by prices.

Rising prices put huge pressure on the Chancellor to give these vital key workers pay rises above 5 per cent or 6 per cent, to avoid hitting them with a real-terms cut.

But there are already clear signs of the Treasury resisting such big cash rises.

The government has spelt out plans to raise salaries for experienced teachers by only 3 per cent in 2022/23.

Health unions have criticised plans to offer NHS staff in England a “miserly” 3 per cent hike.

11. Rail fares

Rail passengers faced a ticket price "nightmare" as the steepest increases in almost a decade hit on March 1.

According to industry body the Rail Delivery Group, people in England and Wales are set to shoulder the largest hike in rail ticket prices since January 2013 with fares predicted to go up by 3.8 per cent.

Labour described the price hike as "brutal" and campaign group Railfuture has accused Boris Johnson's Government of “stoking the fire of the cost of living crisis” by enabling the increase.

Ministers regulate rises for around half of fares including season tickets on most commuter routes.


Source: Mirror

(Links and quotes via original reporting)

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