UK prices have surged by the fastest rate in 30 years thanks to soaring energy, fuel and food costs, it has been announced this morning.
It comes as Chancellor Rishi Sunak will be making his Spring Statement this afternoon. He has been told he has a ‘crucial opportunity’ to help millions being plunged into poverty by the cost of living crisis.
Pleas are mounting to help the millions who could soon have to choose between food and fuel. Mr Sunak is considering cutting fuel duty by 5p a litre and is said to have looked at raising the National Insurance threshold, to take some of the lowest paid Brits out of the soon-to-be-hiked tax, the Mirror reports.
READ MORE: Spring Statement 2022: What time is Rishi Sunak’s announcement and what will he say?
The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation rose to 6.2% in February, up from 5.5% in January and again reaching the highest level since March 1992, when it stood at 7.1%. The rise was higher than expected and comes after prices lifted across food, clothing and footwear and a range of products and services.
The ONS said inflation rose across 10 out of the 12 categories that feed into the index, with only communication and education not seeing increases. Experts have warned that prices will rise further still as the Ukraine conflict pushes up already sky-high inflation, adding to painful price rises for energy, fuel, commodities and food.
The energy price cap rise, the planned reversal of the hospitality VAT cut and increase in National Insurance contributions are set to deepen the crisis facing UK households. The Bank of England last week raised interest rates for the third time since mid-December, to 0.75% from 0.5%, and warned inflation will now peak at around 8% in April – and could hit double-digits if wholesale energy prices continue to soar amid the Ukraine war.
In April, Ofgem will hike the energy price cap by 54% and given the impact of Ukraine on gas prices, a further increase is expected in October, possibly by as much as another 50%. February’s inflation data showed the increase in inflation was led by higher prices of food, clothing, and furniture and household equipment, with Covid lockdowns a year earlier dampening 2021 price rises.
Food and non-alcoholic drinks saw inflation hit 5.1% – its highest level since September 2011 – while there was a record rise across clothing and footwear. Some of the biggest price rises in recent months have been seen at the fuel pumps, with the ONS revealing that average petrol prices hit a fresh record of 147.6p a litre in February, compared with 120.2p a litre a year earlier.
Average diesel prices were likewise the highest ever recorded last month, at 151.7p a litre. The data also showed that the Retail Prices Index (RPI) measure of inflation remained at its highest level since March 1991 – hitting 8.2%, up from 7.8% in January.
So as we wait for Tory Rishi Sunak to deliver any help, let’s look at the biggest cost of living hikes he needs to deal with – and the dates they’ll hit.
UK CPI inflation has already hit 5.5%, raising the cost of food, energy and transport rises at the fastest for three decades. The war between oil giant Russia and wheat-producing Ukraine is now making this worse, with officials now braced for inflation to peak above 8% in April.
It will mean the same pound in your pocket buys you less in bread or fuel, and tightens business margins to the point where firms could go bust. The Resolution Foundation expects inflation to remain high for most of this year and still be above 7% in September – a level not seen since the early 1990s.
Last week the Bank of England increased interest rates to 0.75%, despite warnings it would “crush” households already drowning in the cost of living crisis.
The Bank took the move to slow the economy down and cool soaring inflation. Governor Andrew Bailey recently appealed to workers not to ask for big pay rises, as that fuels inflation further. But it will mean new mortgage rates become more expensive, and inflicts an overnight rise to monthly payments for people on standard variable rates.
Petrol prices have hit record highs due to Russia’s war in Ukraine, leading Chancellor Rishi Sunak to hint he’ll temporarily cut fuel duty. The average price of petrol reached 163.46p a litre while diesel rose to 173.44p a litre Sunday before last.
A month earlier they averaged 148.02p and 151.57p a litre respectively. A family car with a typical 55-litre tank is now paying £89.90p to fill up compared to £68.57 a year earlier. But Labour warned even a rumoured 5p-a-litre cut would make a difference of only a couple of quid to a family tank.
And Mr Sunak would face pressure to make any cut permanent, despite Tories having frozen the duty for 11 years already while raising taxes on everything else.
DATE: April 1
The energy price cap will increase to a record £1,971-a-year for a typical household following soaring gas prices. Around 22 million Brits 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. A second hike that could be just as big or even worse is expected on October 1.
Rishi Sunak has announced plans to help, which include people living in bands A to D getting £150 discount on their council tax in England, and a £200 “rebate” off energy bills in October. But Labour has branded him “the loan shark Chancellor” as the “rebate” is effectively a loan which will need to be repaid over five years.
Tory MPs say he must go further – for instance by increasing the £150 discount or £200 loan, or delaying repayments. But he was reluctant to announce help before April 1.
National Insurance rise
DATE: April 6
A £12bn rise in National Insurance will hit working people as the Treasury looks to cut Covid backlogs in the NHS and begin funding social care.
Employees will pay 1.25p more in the pound on earnings above £9,880 a year, a rise from 12% to 13.25%.This earnings threshold has risen since last year, but only by 3.1% – less than inflation. The Lib Dems brand this a stealth tax that makes Brits pay £45 more.
Those supportive of Boris Johnson argue the levy is “progressive” as the wealthier pay more. But Tory backbenchers hostile to new taxes baulk at the plans as the tax burden hits its highest in decades.
While Rishi Sunak is unlikely to scrap the rise completely, there are claims he could change the earnings threshold – for instance, aligning it with income tax.
Income tax ‘stealth tax’
DATE: April 6
Rishi Sunak chose to freeze income tax thresholds at a time when inflation is climbing at a frightening speed. You’ll have to carry on paying 20% on earnings over £12,570, and 40% on earnings over £50,270 – just like this year.
According to the Commons library, more than a million more people will be paying a higher rate of income tax by 2026. And that was analysed before the latest rises in inflation. The IFS think tank now warns it’s a £20.5bn ‘stealth tax’, two and a half times bigger than first thought.
Real terms cuts to pay – including for NHS and teachers
DATE: April 1
Inflation means many planned rises to public sector wages – which are due every April – will be wiped out by rising prices. At this rate, workers will need a rise of 7% to 8% just to keep up with rising prices, but the Government is resisting these.
Ministers have already spelt out plans to raise salaries for experienced teachers by only 3% in 2022/23. Health unions have also blasted plans to offer NHS staff in England a “miserly” 3% hike. The Royal College of Nursing is demanding 5% above inflation.
Council tax rise
DATE: April 1
Most of England’s families will be hit with a Council Tax rise of 3% or more next Friday, Mirror research reveals. Of 151 councils that run social care, the Mirror found 89 were planning rises of 2.99% – the maximum normally allowed this year.
And a further 39 planned rises higher than 2.99%, by using allowances that were unused in previous years. Now, of course, most people’s council tax will be lower than last year due to the £150 discount for Band A-D homes in England. But there are two big catches.
First, that £150 is meant to pay for energy bills – not absorbing the cost of a tax rise. In Rutland a Band D bill will go up by £91, wiping out much of the £150 discount. Second, the £150 is a one-off. Next spring, you’ll suddenly feel the force of not just this year’s rise but also the April 2023 rise at the same time.
DATE: April 1
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. No10 has said “spending £2bn a month on free tests is not an effective use of taxpayers’ money at this point”.
This prompted a furious row with Labour, some medics and the Scottish and Welsh governments.
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. Boots is preparing to charge £12 for a pack of five.
Student loans ‘stealth tax’
DATE: April 6
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% were scrapped.
That means graduates will have to shell out more of their disposable income as wages and prices rise with inflation. The respected Institute for Fiscal Studies warned the freeze will cost £30,000 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.
Real terms cut to welfare benefits
DATE: April 11
Benefits will rise by 3.1%, as little as £10.07 a month on the rate of Universal Credit. Tory MPs pushed through the plans earlier this year – saying it was in line with inflation. But it’s only in line with what inflation was last September, before prices began to soar at an alarming rate.
Many are warning that this will severely exacerbate the cost-of-living crisis for those who are struggling the most, with food bank use climbing. The Resolution Foundation has urged Rishi Sunak to raise benefits more generously as an urgent priority, ahead of any decision to cancel the National Insurance rise.
Pensions are being cut in real terms – before rising next year
DATE: April 11
Pensions could rise by more than 7% next April after the Tory DWP chief promised to bring back the triple lock – despite soaring inflation.
Therese Coffey suspended the triple lock – a solemn manifesto pledge – for one year in 2022/23 because post-Covid wages were bouncing back in an “anomaly”.
That sparked fury as it meant the state pension will rise by only 3.1% next month, less than inflation. That is a real-terms cut of £388 to Britain’s 12 million pensioners, Shadow DWP chief Jon Ashworth said. But Ms Coffey said the triple lock would return in 2023/24 as promised. That could lead to a rise of 7.2%, experts predict.
A real-terms cut to childcare help
Poor parents 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% 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.
Campaigner and working mum to a four-year-old and Gemma Widdowfield, 36, told MPs: “We’re all in the midst of a cost of living crisis. We’re all feeling the pinch. My childcare’s going up slightly but the Universal Credit cap isn’t going up at all… that’s going to be passed on to us.”