This government has received criticism for not revealing policies first in the House, but instead trailing them in the media. It was only the income tax cut that hadn’t been heavily trailed at the weekend. But rather than focus on what the Chancellor said, I want to focus on how everything that is happening to the cost of living might hit a ‘typical’ family - and then compare that with what the Chancellor announced this lunchtime.
Of course, there is no such thing as a typical family, and my first advice to any householder would be to first figure out what is happening to your personal costs, but let’s play make-believe here and focus on a family with 2 working adults with a typical family home and mortgage, just to get a sense of the quantum.
Here are the obvious ones:
I’ve not been particularly forensic, but this very typical family is out of pocket well over £4,000 a year just from the items listed above. Let that number sink in - I make this point because our research suggests that many people are still underestimating the potential impact on their finances of all the things that are going on in the world.
So, let’s look at what the Chancellor gave in help to typical households:
It was all designed to sound like a lot, but the positive impacts are only a fraction of the pain that UK households will be suffering over the coming period. This will all bite particularly hard as we go into winter, with higher fuel usage on a higher energy cap rate.
The point to make here is that the Chancellor is in a difficult position - essentially the government spent a lot of money on Covid, hoping that the economy could hold higher taxes as we came out of the Covid impact. Instead, we bounced straight into the Ukrainian crisis, with already rising inflation given a boost - in the wrong direction - by pressure on energy/fuel as well as key crops grown in the area.
It would be very hard for the government to ‘make good’ in the way that they tried to do with Covid - in some senses perhaps we have got too used to thinking that the government can just ‘shake the magic money tree’ and make everything ok given all the handouts of the last couple of years. They can’t fix everything. This is likely to be a very painful period for UK households in the coming months.
My advice - everyone should know how they stand relative to the ‘typical household’ that I’ve written about and that you see bandied about in the press. No household is actually ‘typical’ - they’re all different, and understanding the personal impact on you is the first step. At Nous, we’re building tools to help, but ultimately many households will have to make some very difficult decisions in order to balance the books.
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