Politics

Defined: What are the price of residing in a disaster?

As health experts say the “end in sight” of the Covid pandemic is now looming over the UK government.

MEPs are increasingly concerned about an issue known as the “cost of living crisis” caused by a perfect storm of skyrocketing bills and tax hikes.

In a strong warning, some economists have said incomes could be hit even harder than they were during the 2008 financial crash.

This means the British can expect to feel the pinch, with poorer households being hardest hit.

Here, HuffPost UK explains the why, what and how, as well as Tory concerns and Labor proposed solutions.

Bills, bills, bills

Households are already feeling the pressure, ahead of soaring energy prices and the increase in national insurance – which will come into effect in April.

Covid-19 hit global supply chains with pent-up demand, shipping delays, factories in lockdown and employee absences. This has led to rising prices, especially for raw materials.

Food prices have also risen due to supply chain disruptions and increased truck driver wages after thousands left the UK for their home countries in the EU.

Meanwhile, energy bills are expected to skyrocket as the government’s price cap is revised in February and implemented in April.

The wholesale price of gas skyrocketed in late 2021 due to high demand around the world.

Experts believe energy regulator Ofgem could raise the price cap by more than 50 percent this year, bringing the average annual bill to nearly £ 2,000.

Activists and MPs have urged the government to abolish the 5 percent VAT rate on electricity, but even if this is done, many households will still be plunged into fuel poverty.

A new poll also revealed public concerns, which found a third of Britons feared they won’t be able to pay their energy bills this year.

A YouGov poll published by The Times found that 33 percent of people expect their fuel bills to become prohibitive in 2022.

High energy costs

Boris Johnson said he was “constantly” meeting with Chancellor Rishi Sunak, hinting that the government was about to act.

He told journalists on Monday that he understood how “difficult it is” and that they were “reviewing what we can do”.

HuffPost UK also expects the Chancellor to meet with Tory backbenchers on three nights this week to hear their concerns.

Meanwhile, community secretary Michael Gove said government support for energy bills should target “the most needy.”

He said it was “important that we consider a number of options” to help families in need, but that “we should focus our support most on those with the lowest incomes”.

inflation

Inflation is the rate at which prices rise – if the cost of a £ 1 box of donuts increases by 5 pence, inflation is 5 percent.

You may not notice immediately how inflation is changing, but in the long run, those price increases can have a huge impact on how much your money can buy.

Consumers are already seeing some big price hikes, with inflation rising to over 5 percent in November, well ahead of wage growth.

The Bank of England is forecasting a rise in inflation of up to 7 percent – a level that has not been reached since 1991.

One of the main drivers of inflation is high energy bills, with wholesale gas costs skyrocketing around the world.

As Johnson said Monday, “Energy is only one component of the problem. There is general inflationary pressures caused by the return of the world economy from Covid. And I think the US inflation is likely to be its highest since the early 1980s. The euro zone is experiencing exactly the same thing. “

A customer purchases groceries from a Tesco supermarket in East London.

DANIEL LEAL via Getty Images

Tax increases

Sunak put the UK on its way to its highest aggregate tax burden since 1950 when the National Insurance hike began in the spring.

Sunak and Johnson are under pressure to cancel the £ 12 billion annual increase – intended to fund the NHS and welfare – amid concerns over the cost of living.

However, Downing Street has insisted that there are “no plans” to postpone 1.25 percent hike in April.

Jacob Rees-Mogg, chairman of the House of Commons, reportedly told cabinet that the surge could not be justified at a time of rising inflation and rising energy costs.

Meanwhile, some economists say that Sunak’s desire to “balance the books” by increasing taxes when the economy is strained could stifle the UK’s recovery.

It also comes when Sunak was accused of introducing a £ 11 billion “stealth tax” after it was found that more than a million people would be forced to pay the higher income tax rate by 2026.

Freezing income tax thresholds will drag 1.2 million more people into the 40p tax margin due to inflation. The higher income tax rate starts at £ 50,070. Another 1.5 million low-income earners are covered by the base 20p rate, which starts at £ 12,570.

Standard of living

All of the above factors contribute to the cost of living crisis. In addition to rising energy and food prices, other areas of our lives will also come under further pressure.

These include house prices that have continued to rise due to shortages, stamp duty, and competitive mortgage rates.

Tenants also face higher costs, with rents rising an average of 1.7 percent in the 12 months to November, according to the ONS. It can be assumed that this number will continue to increase.

Mortgage rates are expected to rise this year and council taxes are expected to rise in authorities across the country. The price of gasoline remains high and furniture costs have skyrocketed due to rising material costs and truck shortages.

Meanwhile, food banks fear that rising demand could force them to turn down starving families or cut packages.

Julian Knight, Tobias Ellwood and Lord Frost

Tory warnings

Tories urge Johnson to take action to combat rising energy costs, rising inflation and the planned hike in national insurance.

Johnson’s former Brexit minister, who recently resigned because of the government’s political stance, has warned that if he does not return to Tory values ​​of “free markets, free debate and low taxes” he will risk losing the next election.

Tory MP Tobias Ellwood urged Sunak to find temporary and long-term solutions to the cost and security of energy supplies, and Julian Knight MP said Johnson needs to “wake up” and listen to his energy party.

Knight said Johnson needed to get rid of sales tax on energy bills and get rid of green taxes in the short term – a call repeated by other colleagues.

Even host Piers Morgan wrote on The Sun that Johnson should stop being a “mess” or stop being.

Meanwhile, Tory Tees Valley Mayor Ben Houchen said No10 needs to focus on improving the level: “It is time for the Prime Minister to focus, to remember what voted him two years ago and what the British people must see to return him as Prime Minister the next election. “

The Labor Party

Labor has put forward its own proposals to combat the rise in energy prices, including the abolition of VAT on bills and the introduction of a random tax for North Sea oil producers.

They claim the measures could save the average family £ 200 which could rise to £ 600 for the low income person.

Shadow Chancellor Rachel Reeves said: “The Prime Minister was the main proponent of lowering VAT on gas and electricity bills during the referendum.

“But now that cutting those bills would do more than ever, the Prime Minister says no. Well, I am saying that bills cannot be paid for broken promises. “

However, the government has so far refused to take action on VAT, and Education Minister Nadhim Zahawi said oil and gas companies are “already struggling”.

Labor Shadow Chancellor Rachel ReevesLabor Shadow Chancellor Rachel Reeves

Jeff Overs / BBC via PA Media

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