Bank of England hikes interest rate as it indicates UK is already in recession; government hints energy support for schools, hospitals, and care homes could continue beyond six months; submit your cost of living dilemma to personal finance expert Gemma Godfrey using form below.
Kwasi Kwarteng’s fiscal event tomorrow is set to offer tax cuts and other measures to help boost the UK economy amid recession fears.
Sky’s business presenter Ian King and deputy political editor Sam Coates are on hand to answer your questions about the measures and whether they go far enough to tackle the cost of living crisis.
Submit your questions here…
The government’s proposed cost of living package will largely benefit people in London and the South East, analysis by the Onward think tank has predicted.
Despite repeated government promises to level up the North, the think tank said measures such as a reported stamp duty cut for homebuyers will disproportionately benefit those in London.
This is because property prices are higher in these areas.
The analysis also found tax cuts including a reversal of the National Insurance rise and cancelling the planned hike in corporation tax benefit those in the capital more.
Adam Hawksbee, deputy director and head of levelling up at Onward, said: “Tax cuts definitely have a role in boosting growth, but their impact varies enormously and they typically benefit already prosperous places.
“It’s vital that as the government gets on with its pro-growth strategy that it does not inadvertently undermine the central promise of levelling up made to voters in 2019.”
Grocery delivery service Getir has started handing out free milk to its customers.
With milk prices rising by two-thirds over the last year to an average of 86p, Getir said it wanted to help customers make sure they could get hold of the basic essential.
Bottles of milk will be offered to those who spend a minimum of £20 on their grocery shop.
The service currently delivers in London, Birmingham, Manchester, Brighton, Bristol, Cardiff, Liverpool, Southampton, Sheffield, Portsmouth, Nottingham, Bradford, Leeds, Cambridge, and Leicester.
Households have started being given notice of how much their energy bills will rise when the price cap is raised once again on 1 October.
E.On was among those sending out emails to customers detailing significantly increased payments, even for those in credit.
And some customers on social media were not happy…
There was some confusion as the emails did not appear to make clear if the government’s £400 discount on energy bills had already been applied to the higher direct debits.
Under the government’s energy price guarantee, the average household energy bill will rise from £1,971 to a frozen £2,500. This is still an increase of 27% from the previous price cap.
Household bills will still be 96% higher than last year overall.
An E.On spokesman said: “We’re contacting customers to explain recent changes in the energy market and how their bills and direct debit amounts will change from 1 October.
“This includes details of the government’s Energy Price Guarantee (EPG), which sets the price of energy across the country, and the previously announced Energy Bills Support Scheme which will cut bills by a further £400.
“As ever, any customer with a query can get in touch to discuss their account directly, and we have detailed information on our website.
“We know these are difficult times, and we’d urge any customer who is struggling to get in touch as there are ways we can help, including cold weather payments and targeted support such as through our E.On Next Energy Fund.
“We also work with agencies such as StepChange, Citizens Advice and Energy Advice Scotland, and we have dedicated phone lines for customers at risk of being off supply or in other emergency situations.”
EDF Energy had previously increased the direct debits of some customers at the start of the month when bills were projected to rise to an average of around £3,500 before the government intervened.
Earlier, we reported that benefit claimants working part-time up to 15 hours a week will face having their benefits reduced if they don’t take extra steps to earn more money.
A campaign group has hit out at Chancellor Kwasi Kwarteng’s new policy, writing on Twitter: “How to increase child poverty in one simple step – shrink part-time work benefits (38% of mothers work part-time) whilst doing nothing to improve the infrastructure which would enable mothers to work longer hours.”
By Ed Conway, economics & data editor
Before we get on to the Bank of England’s decision today, we urgently need to clear something up. There’s a misconception which sometimes floats around at times like this, that while interest rates are on the rise, the fact that they’re so low compared with historical standards means there’s no reason to be concerned.
You’ve probably heard this argument while talking to relatives or colleagues. Maybe you’ve even trotted it out yourself.
Even after today’s 0.5% increase – the joint-biggest since Bank of England independence in 1997 – interest rates are just 2.25%. That is less than half of what used to be considered the “neutral” level for interest rates – 5%.
It is barely a fraction of the levels interest rates hit in the 1980s and 1990s, when they scaled double-digit peaks.
Surely, only a snowflake would fret about interest rates hitting 4.75%, as they’re expected to do by next year?
And in one respect that’s quite right. Looking solely at the headline interest rate itself, it is indeed far, far lower than it has been for most of history.
But the problem is that the interest rate alone gives you no sense of how affordable mortgages are. This is not just a small point; it’s everything. And here’s where things get interesting, which is to say scary.
Read more here…
Commenting on the Bank of England’s forecast that gross domestic product (GDP) will fall 0.1% in this quarter, a government spokesperson said: “The UK is not alone in facing slow growth, with (Vladimir) Putin’s illegal invasion of Ukraine and weaponisation of energy presenting a global challenge for economies across the world.
“While several one-off factors have also impacted on the domestic outlook, we have recognised the need to take action.
“We will support households and businesses with high energy bills and have committed to an unashamedly pro-growth agenda, which the chancellor will detail in the Growth Plan tomorrow.”
The government will reverse a 1.25% national insurance increase from 6 November, Chancellor Kwasi Kwarteng has said.
He said the government would also cancel a separate tax, the Health and Social Care Levy, which was due to come into force in April 2023 and scrap a planned increase to dividend tax rates.
Ahead of his mini-budget on Friday, he said: “Taxing our way to prosperity has never worked. To raise living standards for all, we need to be unapologetic about growing our economy.
“Cutting tax is crucial to this – and whether businesses reinvest freed-up cash into new machinery, lower prices on shop floors or increased staff wages, the reversal of the levy will help them grow, whilst also allowing the British public to keep more of what they earn.”
The 1.25% increase in national insurance was announced by former chancellor Rishi Sunak to help fund health and social care.
Downing Street has declined to comment on the Bank of England’s decision to raise the interest base rate.
A spokesperson said: “That is obviously a matter for the independent Bank of England.
“I would point you to the support that we’ve set out to help people with the cost of living, which we know is a concern for families and businesses across the country.
“I’d point you to the support that we’re providing and the immediate assistance we’ve provided for energy bills in particular.”
Chancellor Kwasi Kwarteng has said he expects the Bank of England to take the forceful action necessary to contain inflation.
In a letter to the bank’s governor Andrew Bailey, he said: “It is essential to businesses and households across the country that inflation is brought back to target, and I know and expect that the MPC will continue to take the forceful action necessary to achieve this and to ensure inflation expectations remain firmly anchored.”
He said he was focusing “unashamedly” on growing the economy.
Mr Kwarteng went on to say there would be robust fiscal discipline in the medium term.
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