Millions of households across the country will see a wide variety of goods and services increase in price this year due to a worsening cost of living crisis.
The prices of many goods and services are being driven up by soaring inflation rates, wholesale prices, and the war in Ukraine, according to the government. On Wednesday morning, new figures were released revealing that the inflation rate eased back further last month.
The rate of Consumer Prices Index (CPI) inflation has fallen to 10.5 per cent in December from 10.7 per cent the previous month. However, there is little sign of respite for families, with CPI still in double digits and food and drink inflation soaring yet again, to 16.8 per cent in December up from 16.4 per cent in November, marking the highest level since September 1977.
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Prices also rocketed across restaurants and hotels as hospitality firms were forced to pass on their own surging costs, with inflation across this sector jumping to 11.3 per cent in December – the highest level for more than 31 years.
A Parliamentary report argued that the British economy has been hit hard by a variety of factors. It explains: "For the UK, a key economic effect of the conflict is higher energy prices. After rising following the invasion, gas prices on international markets have fallen steadily, and oil prices (in US dollars) have been falling since June. As a result, road fuel prices and household energy bills in the UK have increased. Energy bills for businesses have also increased and are expected to continue to rise."
To help you better prepare your finances over the next 12 months, we've broken down all the things in the UK that are expected to increase in price.
Energy bills
In September last year, then Prime Minister Liz Truss announced a new Energy Price Guarantee which would cap the unit price of electricity at £2,500. In the 2022 Autumn Statement, the Chancellor of the Exchequer, Jeremy Hunt, announced that the Energy Price Guarantee would be extended for six more months, lasting until March of this year.
Because the Energy Price Guarantee is lower than the cap that would have been implemented by Ofgem, billpayers may see their electricity and gas costs skyrocket in spring. Ofgem previously stated that the energy price cap for the first three months of 2023 will increase to £4,279 annually, before being reviewed once again in February.
However, households will not completely be thrown to the wolves. From April 2023 to April 2024, a more targeted Energy Price Guarantee will be implemented, raising the cap to £3,000 per year depending on your energy usage.
Council tax
A major hike in council tax payments is expected this year. While Council tax is decided by individual local authorities, government rules dictate that councils can hold a local referendum to decide if they want to increase council tax by more than 3 per cent in a year.
During the Autumn Budget, Mr Hunt announced that he would raise this threshold to 5 per cent, which would make it easier for councils to enforce higher taxes. Analysis suggests that most councils will hike council tax by 5 per cent annually over the next five years in hopes of raising more money and increasing social care funding.
Data from the Treasury suggests that around 95 per cent of councils will hike payments as high as they are permitted.
Fuel duty
Falling fuel costs are one of the main drivers of the slowdown in the pace of price rises seen in today's inflation figures, with the average petrol price down by 8.3 pence per litre month-on-month in December. However, motorists all across the country may be paying more for filling up their cars from Spring.
That's because a 23 per cent increase in fuel duty could be implemented in March, according to the Office of Budget Responsibility (OBR). The OBR states the price of petrol and diesel could be raised by as much as 12 pence a litre. "This would be a record cash increase" said the OBR's Economic and Fiscal Outlook which was published in the backdrop of Mr Hunt's Autumn Statement.
However, a Treasury spokesperson said: "The 23% figure came from the OBR, not the Treasury and it’s based on forecasts that are subject to change.” The spokesperson added: “We have not announced anything on fuel duty today; the existing 5p cut will remain in place until March 2023 and final decisions on fuel duty rates will be made at the Spring Budget.”
Despite this, there are signs that the price of fuel may not be as severe as previously predicted. In the first-half of January 2023, the average UK price for a litre of petrol fell below 150p for the first time since Russia's invasion of Ukraine. The AA highlighted that a litre of petrol typically cost 149,74p on Monday, January 9.
Water
Waters bills are expected to rise from April 1, 2023. The customer price of being provided water will be affected by several factors, such as the Consumer Price Index including owner-occupiers' housing (CPIH) which helps measure the cost associated with owning and maintaining a home.
Water supplier Castle Water predicts that bills could increase by as much as 13 per cent in April, based on the BofE forecast and the current PR19 revenue control for water networks. Customers on Rateable Value tariffs - otherwise referred to as 'Unmeasured' on bills - will be hit hardest by water bill increases.
This is because such tariffs are set at a very high estimated level of consumption. To help avoid this, you can contact the Developer Services department of your water wholesaler to ask for a quote to install a water meter.
Mortgages
The ONS has warned that more than 1.4 million households in the UK could face increased interest rates when they renew their fixed-rate mortgages this year. It states: "The majority of fixed-rate mortgages in the UK (57%) coming up for renewal in 2023 were fixed at interest rates below 2%.
"Those deals that are due to mature through the course of 2024 will be from two-year fixed rate deals made in 2022 and five-year fixed rate deals made in 2019, when mortgage rates were generally higher than 2%."
This means the cost of repaying a mortgage will increase dramatically. For example, in the case of a 25-year capital and repayment mortgage, the monthly mortgage repayment on the same mortgage could increase by £220 (from £424 to £644).
For a £300,000 mortgage, monthly repayments could rise by £661 (a 25-year capital and repayment mortgage, then the monthly mortgage repayment on the same mortgage would increase by £220 (from £424 to £644), according to the ONS.
Broadband and phone bills
Many of Britain's major telecom providers adjust their prices in line with the Consumer Price Index or Retail Price Index. Therefore, if inflation continues to spiral throughout 2023, many providers could increase their charges from 13 per cent to 17.9 per cent.
Typically, a provider will adjust their prices via the rate of inflation plus 3.9 per cent (Inflation+3.9%), although, both Virgin Media and Sky use their own formula. However, depending on future inflation rates, the increase may be less dramatic.
Train tickets
The government announced that it will step in and cap fare price increases at 5.9 per cent. For example, an annual season ticket from Reading to Londo which previously cost £5,044 will increase by £630, costing £5,664.
Despite this, the government stresses that if the cap was raised by RPI, the price of a season ticket could have risen by 12.3 per cent.
Food and non-alcoholic drink
Food and non-alcoholic drink prices have been increasing rapidly due to the rising cost of transporting, packaging, and importing goods from both inside and outside the European Union. - in the year leading up to September 2022, prices for food and non-alcoholic beverages rose by 14.6 per cent.
Research by credit card brand Aqua, has examined projected annual inflation rates to determine which popular supermarket items will increase this year. It predicts the following price changes:
- Yorkshire tea bags - from £5.03 to £5.35
- Bottle of Pimms - from £21.75 to £23.15
- Pub roast dinner - from £14.76 to 15.42
- Cornetto - from £2.79 to £2.97
Alcohol
A freeze on alcohol duty will be scrapped from February, which means prices are likely to rise. On average, the price of beer will rise by around 7p, cider by around 4p, a bottle of wine by 38p, and a bottle of spirits £1.45.
Passports
From February, the government will increase new passport fees for all applicants.
The proposals, which are subject to Parliamentary scrutiny, will include the following:
- the fee for a standard online application made from within the UK will rise from £75.50 to £82.50 for adults and £49 to £53.50 for children
- postal applications will increase from £85 to £93 for adults and £58.50 to £64 for children
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