Britain’s real economic pain starts today. Overnight, the cost of living has jumped once again: energy, water, broadband, public transport, TV licences – all up. So too are council tax bills, capital gains, and vehicle taxes. And that’s before we even get to the slow stealth march of fiscal drag.
Last week, the Office for Budget Responsibility warned that inflation will hover close to 4 per cent this year – driven by higher food and energy prices – and won’t fall back to the Bank of England’s 2 per cent target until 2027. One of the biggest culprits? Energy. Ofgem’s latest price cap hike – up 6.4 per cent – adds £111 to annual dual-fuel bills, bringing the average to £1,849. Analysts had expected a 5 per cent rise, but Ofgem blamed ‘rising global wholesale prices’ for the steeper increase. Worth remembering, too: Britain’s energy prices remain four times higher than America’s thanks to years of short-term thinking and net zero zealotry.
Taxes go up today as well, with most English households suffering the 4.99 per cent maximum increase to council tax allowed by legislation. It’s even worse in Scotland where most homes will see council tax go up by more than 8 per cent. If you’re unlucky enough to live in Falkirk – between Edinburgh and Glasgow – your council tax bills have just gone up by 15.6 per cent. (Use our tool below to see the local tax changes in your area.)
Water bills went up overnight too, with Thames Water customers facing hikes of nearly a third while the TV licence has gone up by a fiver. Vehicle tax for petrol diesel cars also goes up by £5 and electric cars will no longer be tax exempt from today either.
The threshold at which stamp duty kicks in also dropped overnight from £425,000 to £300,000 for first-time buyer,s and from £250,000 to £125,000 for those who already own a home. Paul Johnson, of the Institute for Fiscal Studies, has called for the tax to be abolished because of its discouraging effect on housing transactions.
Meanwhile, research published yesterday by Retail Economics suggests that Rachel Reeves’ £25 billion National Insurance raid on employers will translate into £1.7 billion in price rises for consumers, as companies pass on the cost.
The only people who will wake up to good news today are – as ever – pensioners who will see the state pension rise by 4.1 per cent matching average earnings increases. The full state pension goes from just over £221 per week to £230 per week.
But for everyone else, ‘Terrible Tuesday’ may be just the beginning. The opposition are calling this month ‘awful April’, as tax hikes begin to ripple through the jobs market. The National Insurance rise is being compounded by increases in the minimum wage for younger workers, making hiring less attractive for employers. Job vacancies – once at record highs post-Covid – have flattened out. Business surveys suggest firms are preparing to freeze hiring or cut staff altogether. Worse still, the relative increase in labour costs as a result of the NICs increase is felt most keenly in the lowest 10 per cent of workers – so it’ll be the poorest employees who are most likely to end up jobless.
And if all that wasn’t bad enough, tomorrow marks ‘Liberation Day’ in America where Donald Trump is set to unleash even more tariffs on the world. As Isabel Hardman reported in last night’s Evening Blend newsletter (sign up here) optimism in Downing Street is fading that the UK will be able to find an exemption or special treatment to avoid the raft of tariffs that Trump is set to impose on goods imports. Talks are set to ‘continue beyond’ tomorrow – i.e after they’ve come into effect. If Starmer isn’t able to mitigate the tariffs at all and the worst economic predictions come true then the OBR warn ‘ this could reduce UK GDP by a peak of 1 per cent and reduce the current surplus in the target year to almost zero’. Reeves’s headroom would we wiped out once again and just like that, we’re back on the fiscal cliff edge with more tax rises then inevitable. At least it’s sunny outside.
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