25th February 2013
Financial journalist Jill Insley finds that most household bills have risen substantially.
The average duel fuel bill in the UK is already £1,420 a year, up 19 per cent since 2009. But Ofgem warns that the UK’s over reliance on gas as coal, oil-fired and nuclear power stations are decommissioned, will push prices higher still.
Alistair Buchanan, chief executive of the regulator, says that falls in the UK’s power production capacity are likely to lead to the importation of more gas at a time when demand is growing across the globe.
He said that Britain would be “very tight” on power station capacity in three to five years’ time. “We’re going to have to go shopping in world markets at a time when they will be very tight [on capacity] themselves.
“There isn’t a single person or people to blame. In my view it was a single event – the financial crisis. Before the financial crisis the government had backed a visionary approach to energy on wind, water and nuclear… then came the financial tsunami.”
The impact of the “financial tsunami” is not limited to energy prices: many other aspects of household finance have been affected. In the last few years young families have faced soaring food costs, extortionate childcare fees, rising petrol and diesel prices, and in many cases the axing of child benefit.
At the other end of the age scale, the cost of living in January 2013 compared to September 2007 has risen substantially more for the over-50s than the overall population. Saga says that while people in younger age groups benefitted greatly from falling mortgage interest payments as the Bank of England cut interest rates during the recession, older people not only failed to benefit from this but also saw a greater proportion of their income going on food and energy bills.
Compared with September 2007, the cost of living as measured by RPI has risen for 50-64 year olds by 20.8 per cent, 65-74 year olds by 23.7 per cent and those aged 75 and over by 24.4 per cent. In contrast, RPI for the whole population has increased by 18.2 per cent.
So what has gone up?
The AA has warned that fuel prices are spiralling so high that drivers “can’t take any more”. The motoring organisation said the average cost of petrol has risen 6.24p a litre since early January, adding £3.12 to the cost of filling up a typical tank.
The Food Statistics Pocketbook, published by Defra, showed that the price of food has risen by one third since the financial crisis began in 2007, causing shoppers on lower incomes to settle for lower quality and less healthy food. But Mark Price, managing director of Waitrose, warned last month that things are set to get worse: he says that British shoppers should brace themselves for “massive” food price increases as unfeasibly wet weather last year lead to failed crops and increased commodity prices.
Childcare costs have risen by 5.8% for a child under the age of two in a nursery and by 3.9 per cent for those over two during 2012, according to the charity Daycaretrust. Average childcare costs now exceed £100 for a 25-hour, part-time place in many parts of Britain and the average yearly expenditure for a child under two stands at £5,103, while the most expensive nursery surveyed charged £300 for 25 hours of care – £15,000 for a year’s childcare. Childminder charges have also risen by more than the rate of inflation – by 3.2% for a child under two and 3.9% for those aged two or more.
Has anything gone down?
Mortgage rates have tumbled since introduction in August 2012 of Funding for Lending , a government scheme to provide cheap money to banks on the basis that they lend it on to mortgage borrowers and small businesses. Mortgage rates have tumbled in the last few weeks to the lowest levels for 24 years according to the financial product data provider Moneyfacts, even for first time buyers with small deposits.
The average two year fixed rate loan is 4.11 per cent in February 2013, while a five year fixed rate costs 4.14 per cent. “To put the current rates into context, if you had opted for a two year fixed in June 1989, you would have paid an average rate of 12.83 per cent (the least competitive rate was a breath stopping 13.20 per cent). A five year fixed rate averaged out at 12.85 per cent,” says Sylvia Waycot, editor at Moneyfacts.
Unfortunately the Funding for Lending scheme means that banks are not so reliant on raising money from depositors: they have slashed interest rates on savings accounts, making life very difficult for those who depend on savings interest to supplement their income. The rate on the average one year fixed rate bond is 1.81 per cent while the average no notice account pays just 0.81%, according to Moneyfacts.
No wonder that research by ING shows that although savages levels recovered in the first half of 2012, savings dropped in the autumn and winter. Whereas the average man or woman had accessible savings worth £2,020 in 2009, the average savings balance has now dropped to £1,678.
Around 1.2 million families have also seen a reduction in or complete loss of their entitlement to child benefit since January, when the government implemented income caps preventing the UK’s wealthiest families from receiving the benefit.
The benefit is tapered once a household’s income reaches £50,000 , and is eradicated once they earn £60,000. Child benefit is paid at the rate of £20.30 a week for the first child, and then £13.40 a week for each child after that. Its loss means income reduction of £1,752 a year for a family with two children.