UK government announces spending and tax plans

53 minutes ago

Extension of energy bill support a breeze

Laura Suter, head of personal finance at UK investment platform AJ Bell, said the extension of the energy price guarantee would be a “huge relief” for many households who face another huge hike in energy bills from April.

“For Chancellor Jeremy Hunt, extending the Energy Price Guarantee is a no-brainer as the previous plan of making it less generous while stopping the monthly rebate we all get off our bills would have reached the average household an extra £900 on their annual fuel bills in one fell swoop,” Suter said in an email on Wednesday.

“An important part of the announcement is also that those using prepaid meters will no longer have to pay higher tariffs for their energy. The inverted policy means that the poorest and most vulnerable households are currently paying more for their energy than the richest in society. Why it took the government until the end of the cost-of-living crisis to fix this anomaly will baffle many.”

-Elliot Smith

Before an hour

Extension of electricity bill support by three months

The Government announced on Wednesday morning that its Energy Bill Support Scheme, which aims to limit energy bills to £2,500 a year for the average household, will run for a further three months.

The Treasury said October energy prices were 50% lower than forecast but remained high. The government hopes the extension will bridge the gap to a price cut expected from late June.

“High energy bills are one of the top concerns for families, which is why we are maintaining the Energy Price Guarantee at its current level,” Hunt said in a statement.

“With energy bills set to come down from July, this temporary change will close the gap and ease pressure on families while helping bring down inflation.”

The total cost of extending the energy price guarantee at its current level will be £4 billion, the Treasury has said. The EPG cap will increase from £2,500 to £3,000 from July to the end of March 2024.

-Elliot Smith

Before an hour

A household rife with unrest as public sector workers strike en masse

Union members gather outside Westminster Central Hall in London February 1 before a march and rally against the government’s controversial plans for a new law on minimum service levels during strikes.

Kirsty O’connor – Pa Pictures | Pa Pictures | Getty Images

With the cost of living crisis still raging and public sector wages struggling to keep up with inflation, strikes have become a staple in the UK during a ‘winter of discontent’.

As Hunt goes to the dispatch box in the House of Commons on Wednesday, thousands of teachers, young doctors, civil servants and railway workers will picket and protest.

Members of the National Education Union (NEU) begin a two-day strike in England on Wednesday affecting schools and colleges.

Young doctors who are members of the British Medical Association and the Hospital Consultants and Specialists Association are avoiding it over pay and conditions. This follows industrial action by nurses throughout the winter.

Up to 150,000 civil servants in more than 100 government agencies and departments, members of the Prospect and Public and Commercial Services unions, will leave Wednesday amid disputes with the government over wages, pensions, layoff terms and job security.

The London Underground system will face serious disruption on Wednesday as members of unions RMT and ASLEF strike over job cuts, working conditions and pensions.

-Elliot Smith

3 hours ago

The British economy in figures

The UK economy stagnated in the last quarter of 2022 to narrowly avoid entering a technical recession, but suffered a sharp slump in December.

The latest data showed that the economy grew 0.3% annually in January, beating expectations.

Alongside Hunt’s autumn statement, the independent Office for Budget Responsibility forecast that UK households would experience the sharpest decline in living standards on record amid persistently high food and energy costs and tightening financial conditions.

The OBR also forecast a five-quarter recession that would result in a 1.4% contraction in GDP in 2023.

Deutsche Bank hinted in a note last week that this is likely to be revised to a contraction of just 0.5%, in line with the Bank of England’s forecast for a flatter downturn.

Annual UK consumer price index (CPI) inflation fell to 10.1% in January from 10.5% in December, after hitting a 41-year high of 11.1% in October 2022.

The Bank of England raised its main interest rate by 50 basis points to 4% in February, but the future pace of monetary tightening remains unclear as policymakers seek to push inflation towards the bank’s 2% target.

The Monetary Policy Committee will assess Tuesday’s tight jobs data and next Wednesday’s consumer price index ahead of its interest rate decision on March 22nd.

-Elliot Smith

3 hours ago

BNP Paribas: Fiscal credibility ‘easily lost, hard to regain’

Paul Hollingsworth, BNP Paribas’ chief European economist, noted that the Conservative government’s fiscal credibility was “easily lost and hard to regain” after 2022 became a roller-coaster ride for economic policy under four finance ministers in just 12 months.

Hunt aims to put public sector debt-to-GDP ratio on a downward trend and bring public sector net borrowing below 3% by 2027/28.

However, Prime Minister Rishi Sunak’s Conservative Party is currently more than 20 points behind the main opposition Labor party in most national opinion polls, with the next general election set for 2024.

“The improved macroeconomic environment and better-than-expected performance of public finances have brought UK Chancellor Jeremy Hunt a £25-30bn windfall,” Hollingsworth said.

“Our central case is that he’ll only give away about half of that and bank the rest for some likely reelection giveaways.”

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