UK households have paid almost £14,000 on average in additional costs for mortgages, loans, energy and water bills over the past five years, according to a report urging the chancellor to tackle soaring living costs at the budget. With less than a fortnight before John Healey’s first budget as chancellor, the Trades Union Congress (TUC) said the cost of living crisis was weighing on the economy as hard-pressed households held back on spending. Urging the chancellor to support households through a series of measures in the budget, it said the UK had recorded the weakest growth in consumer spending in the G7 since before the pandemic.
According to analysis of official figures by the union umbrella body, British households have forked out an additional £13,961 on bills on average since 2021 – an extra £2,792 a year – amid soaring inflation triggered by the exit from the Covid pandemic and wars in Ukraine and the Middle East. Paul Nowak, the TUC general secretary, said: “From austerity to the pandemic to energy shocks and Trumpflation, working people have borne the brunt of crisis after crisis. When the crackpots in the White House or the Kremlin launch an illegal war, everyone pays the price in their bills.” In his speech at Labour’s conference in Liverpool, Healey pledged to use his 28 October budget to give households “breathing space”.
However, he warned that the government had limited resources to soften the global economic shock hitting Britain. Against a volatile backdrop, the Treasury has been preparing for a “tightly focused” budget to limit the potential for a market backlash provoked by large tax and spending measures. The International Monetary Fund this week urged Healey to “stay the course” to cut the budget deficit amid rising borrowing costs in global financial markets.
The chancellor is however under growing pressure to take action to support households and businesses before the winter amid predictions that consumer energy bills could reach £2,000 a year from January for the typical household. After retail industry bosses pressed Healey for support in Downing Street meetings on Tuesday, the Confederation of British Industry said he should listen to calls for a cut in employer national insurance contributions to encourage firms to take on younger workers. The lobby group also called for cuts to business electricity costs, changes to business rates and measures to support private investment.
In a separate report, the centre-left IPPR thinktank urged Healey to raise £16bn, mostly through a rise in capital gains tax that would be softened by a new entrepreneur “super exemption”. It was reported on Tuesday that Healey had rejected calls from Labour MPs and thinktanks to use the budget to equalise the rates at which capital gains and income from work are taxed. However, the IPPR said headroom against the chancellor’s fiscal rule was likely to have shrunk by between £7bn and £15bn since the spring amid the impact on government finances from the Middle East war.
Calling for a cost of living package funded largely by higher taxes on wealth, it urged Healey to introduce a “rent stabilisation mechanism” to cap private rent increases, alongside a £2,000 cap on consumer energy bills, a freeze in fuel duty, and an increase in housing allowance benefits for households on universal credit. The TUC said Healey should launch a social energy tariff and take action to help poorer households and young people with rising living costs. It also called for a rise in capital gains tax and higher taxes on banks.
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