Sunak’s tax rises to worsen UK’s cost of living squeeze

Bloomberg

Britain’s cost-of-living squeeze will tighten in 2023, with families shouldering higher tax payments at a time when energy bills and interest rates also are soaring.
The Resolution Foundation said the average household will pay £1,000 ($1,204) more in taxes next year and £900 more for electricity and natural gas. About 2 million mortgage holders will suffer an average increase of £3,000 in their annual payments, the research group said.
The tax increases from Prime Minister Rishi Sunak’s government were aimed at stabilising the public finances and bolstering investor confidence in UK assets, which was shaken by unfunded tax cuts announced by his predecessor in September.
The cumulative effect of rising costs will be one of the worst squeezes on living standards in memory, extending a trend that started this year when inflation leaped at its strongest pace in four decades. Household disposable incomes already fell by the most in a century in 2022 and are set to fall by a further 3.8% next year, the report said.
“From a cost-of-living perspective, 2022 was a truly horrendous year — far worse than any year in the pandemic or financial crisis,” said Torsten Bell, chief executive officer of Resolution. “For families’ living standards, things will get far worse in 2023 before they start to get better.”
The Resolution Foundation said the one positive of the outlook was that slower demand from consumers will help the BOE bring double-digit inflation back down to its 2% target.
The UK labour market remains the biggest variable impacting inflation, the report said, and will be determined by whether firms raise prices to attract or retain staff. But with signs of vacancies cooling, and short-term unemployment and redundancies rising, it’s unlikely that workers will be able to demand inflation-busting pay increases that could spur a wage-price spiral.

UK set to halve energy support for businesses

Bloomberg

The UK government is set to halve the level of support it gives to businesses to help with their energy bills, the Times newspaper reported.
Chancellor of the Exchequer Jeremy Hunt has been weighing how much assistance to provide companies when an existing six-month program of energy support worth £18 billion ($21.7 billion) expires at the end of March. He had initially planned for the aid to become more targeted at vulnerable sectors, but officials in recent weeks indicated he was leaning towards a universal extension of the program, which was designed to shield firms from the pain of soaring costs linked to Russia’s war in Ukraine.
The Times reported that Hunt now plans to announce a 12-month extension in which businesses receive aid at below half the current level, with the new package costing less than £20 billion over the longer time frame. The paper didn’t say how it obtained the information. Hunt has been paring back Britain’s energy support packages as he tries to stabilise the nation’s public finances, which suffered a shock under the premiership of Liz Truss.