The UK received a rare flurry of positive economic news in mid-August when the Office for National Statistics announced that wage increases had gone up at a record rate, that inflation had fallen to 6.8 per cent and that food prices had begun to climb down.
While those might have suggested the cost of living was finally easing, the positivity masked the fact that core inflation – which removes volatile food and energy prices from the equation – remained stubbornly unchanged at 6.9 per cent, leading some experts to warn that any gains would be “swallowed up” by higher borrowing costs.
With inflation still well north of its 2 per cent target, the Bank of England looks all but certain to implement a further interest rate rise when its Monetary Policy Committee next meets in September in a bid to tame it.
That is likely to take the current 5.25 per cent base rate up to 5.5 per cent, a further unwelcome development for many already struggling with mortgage payments, particularly those with tracker or standard variable rate mortgages that follow the central bank’s lead.
“Most people haven’t yet felt the interest rate squeeze in full, and it’s only when historic fixed rates roll off that we’ll really know the full extent of the economic pain rate rises have inflicted,” Wealth Club investment manager Nicholas Hyett has warned. “We’re not out of the woods yet.”
With that in mind, here is a look at what state financial support is available to households this September.
Support payments
Despite the expiration of Rishi Sunak’s Energy Bill Support Scheme at the end of March (an initiative that handed out £400 in monthly instalments of £66 and £67), millions of households on low incomes will receive further cost of living support from the government this year worth up to £1,350 in total.
Eight million eligible means-tested benefits claimants, including people on universal credit, pension credit and tax credits, will receive the next £300 instalment of the cost of living payments as part of a programme that began this spring, with the money going directly to bank accounts in three tranches, the Department for Work and Pensions (DWP) has said. The payments will total £900 overall.
There will also be a separate £150 payment for more than six million people with disabilities and an extra £300 for over eight million pensioners.
Here are the payment windows that have been announced so far, with more precise dates expected later in the year:
- £301 – First cost of living payment – already issued between 25 April and 17 May (or 2 to 9 May for people on tax credits but no other low-income benefits)
- £150 – Disability payment – between 20 June and 4 July 2023
- £300 – Second cost of living payment – during autumn 2023
- £300 – Pensioner payment – during winter 2023/4
- £299 – Third cost of living payment – during spring 2024
Benefits going out as usual
The usual state support in the shape of benefits and pensions payments will also be going out as normal in September, with no bank holidays scheduled to confuse delivery dates.
Anyone expecting to receive any of the following from the DWP can expect their money on the usual date this month.
- Universal credit
- State pension
- Pension credit
- Disability living allowance
- Personal independence payment
- Attendance allowance
- Carer’s allowance
- Employment support allowance
- Income support
- Jobseeker’s allowance
For more information on how and when state benefits are paid, please visit the government’s website.
Energy Price Cap falls below guarantee’s threshold
The belated improvement in the weather we are seeing in September might not be comfortable for everyone but it will at least greatly reduce the need for having the central heating switched on, which proved such an expense over the course of the winter just gone.
The government’s Energy Price Guarantee (EPG) – introduced by short-lived prime minister Liz Truss a year ago to ensure households paid no more than £2,500 for their electricity and gas, with the government subsidising the remainder owed to providers under Ofgem’s Energy Price Cap (EPC) – was extended by chancellor Jeremy Hunt in his Budget of 15 March for a further three months.
Mr Hunt had reportedly been tempted to increase the EPG to £3,000, a considerably less generous offer that would have eased the burden on the state, but settled for extending the guarantee into April, May and June at its present rate before finally bringing that hike into effect from July.
However, now that Ofgem’s cap has fallen below £2,500, having been set at £2,074 for the third quarter of 2023, the EPG has been rendered an irrelevance, for most, in any case, with the vast majority of households now paying the EPC rate as normal.
That £2,074 figure represents a huge 17 per cent fall from the £3,280 the cap was set at during the second quarter, from which households were shielded by the then-very-necessary intervention of the government’s overriding EPG.
That decrease reflects recent drops in wholesale energy prices – the amount energy firms pay for electricity and gas before supplying it to households – and, although it is a significant drop from the eye-watering rates of the last two years, the figure remains more than £1,000 a year above pre-pandemic levels.
Ofgem has since announced that the cap will be set at £1,923 for the final quarter of the year.
As for what might happen next, consultancy firm Cornwall Insight sees almost no change by the time the next EPC is announced for the quarter beginning 1 January 2024, at which point it predicts the typical annual bill be at £1,932.24.
The forecaster is currently predicting small declines for the second and third quarters of next year as well before a slight uptick comes in from next October.
Despite that the picture is, on the whole, looking far more stable than it did a year ago when the consequences of Russia’s war in Ukraine were first being felt in global energy markets, which is certainly a welcome development.
