Many of the measures announced in the mini-budget are now being rowed back on.
17 October 2022
New Chancellor Jeremy Hunt has announced a string of U-turns after weeks of turmoil which have dogged the markets following the mini-budget.
Here is a look at what the latest announcements could mean for households.
– What does it mean for energy bills?
Under the previously announced energy price guarantee, the average household would pay around £2,500 annually for their energy bill, although as the cost was limited per unit and not per bill, some households would pay more, depending on their energy use. The guarantee was due to last for two years.
But on Monday, Mr Hunt said that, while the guarantee will continue until next April, a review will be launched to consider how to support households and businesses with energy bills after April 2023.
The review will design a new approach aiming to cost taxpayers significantly less than planned, while ensuring enough support for those in need, the Government said.
Any support for businesses will be targeted to those most affected and the new approach will better incentivise energy efficiency.
Households are already receiving both widespread and targeted support to help with energy costs.
– What about mortgages and rents?
Mortgage rates have rocketed in recent weeks amid the wider turmoil in the markets, although figures from Moneyfacts.co.uk indicate there have already been signs of mortgage rates steadying over the weekend.
Monday’s U-turn announcements could help to shore up market confidence, in turn helping to steady mortgage rates.
The choice of mortgage products remains significantly lower than before the mini-budget.
Bank of England base rate hikes have also been pushing up mortgage rates in recent months and further base rate rises are expected.
Mortgage rate hikes also feed into the costs paid by buy-to-let landlords, which could mean some have to put their rents up or even sell up if letting is less profitable.
Supply shortages in the rental sector are already putting an upward pressure on rents.
Nathan Emerson, CEO of Propertymark, which represents estate and letting agents, said: “Mortgage rates were already rising and we hope the wider announcements made today will translate into a settling down of that trajectory.”
Simon Gammon, managing partner at Knight Frank Finance, said: “While we don’t expect mortgage rates to fall in the short term, stability in the swaps market should slow the pace of rising mortgage rates relative to some of the worst case scenarios that looked possible in the days following the mini-budget.
“Only time will tell as to whether this is a temporary reprieve, however.”
– How about pay packets?
The basic rate of income tax was due to reduce next year, meaning people would have had a boost from their April pay packet onwards.
But now the cut from 20% to 19% has been put on hold indefinitely, until economic circumstances allow for a cut.
Had the cut come into place in April 2023, an average UK earner on £30,000 a year would have paid £174 less in tax next year, according to wealth managers Quilter.
But, on the other hand, a previously-announced national insurance (NI) cut will remain in place – and a £30,000 earner could still be around £218 better off annually because of this, Quilter said.
– What about alcohol prices?
Plans to freeze alcohol duty rates from February 1 2023 for a year have been ditched.
The Scotch Whisky Association said the move will add to pressures for the hospitality industry and household budgets as costs inevitably increase.
Emma McClarkin, chief executive of the British Beer and Pub Association said: “The Chancellor’s decision today to reverse the alcohol duty freeze is a huge blow to brewers and pubs.”