What made us richer and poorer in 2013
It's been another tough year for many of us. Here are the major things that have affected our finances over the last 12 months.
The economic headlines may be getting better, but for many of us 2013 was another tough financial year. Many of the Government’s austerity measures are only now really coming into effect.
Let’s take a look back at the main things that affected our finances this year.
Government tax measures
The tax-free personal allowance for Income Tax rose from £8,105 to £9,440 in April. Meanwhile the higher-rate (40%) threshold reduced again from £34,371 to £32,011.
The additional rate for people earning over £150,000 a year was cut from 50% to 45%.
Age-related personal allowances are now frozen at £10,500 for those born between 6th April 1938 and 5th April 1948, and £10,660 for those born before 6th April 1938 from 6th April.
There are no longer any age-related allowances for any retirees born after 6th April 1948; instead they are taxed at the same limits as working-age people. This controversial measure from Budget 2012 was dubbed the ‘granny tax’.
Government benefit changes
Most working-age benefits were increased by 1% from April. The exceptions were the basic and 30-hour elements of the Child Tax Credit and Working Tax Credit, and Child Benefit, which are all frozen until April 2014.
A benefit cap of £500 a week for couples and single parents with children at home, and £350 for single adults who don’t have children or children living at home, was introduced. The exceptions to this rule are households where someone receives Working Tax Credits, disability or armed forces benefits.
The Government’s flagship Universal Credit, which replaces five benefits including Jobseeker’s Allowance and Child Tax Credit with a single payment, has started to be introduced. However, IT disasters may see its final deadline pushed back.
The Basic State Pension rose by £2.70 a week from April to a maximum of £110.15 a week.
And people earning over £60,000 are no longer entitled to claim Child Benefit, with those earning between £50,000 and £60,000 having their payments reduced on a sliding scale.
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Pay rising more slowly than inflation…
Inflation continues to sit above the Bank of England’s 2% target. The Office for National Statistics says that pre-tax pay rose by 2.1% in the year to April. However, inflation outpaced it, rising by 2.4% over the same period.
…particularly energy prices
Recent Office for National Statistics data shows that we’ve actually been spending less per week in recent years than at the start of the century. Average household spending is down from £533.50 a week in 2004/05 to £489 in 2012.
Housing, fuel and power costs now make up the biggest part of our weekly spend. Predictably, this winter saw another round of above-inflation price rises by most energy companies, notably the Big Six. The Government has now responded to public disquiet by announcing that it has changed how certain levies are paid for, which should account for a saving of £50 off the average household’s fuel bill. However, not all of the energy companies are passing this on in full.
See if you can cut your energy bills by switching supplier
Motor fuel prices down at last…
There was some relief for motorists though as two fuel duty rises were scrapped, one scheduled for September and one for next year. The AA reported that the average UK petrol price fell to its lowest level in more than two and a half years in November. Diesel prices also dropped.
How to find cheaper diesel and petrol
…but rail fares still going up
Rail fares continued to rise above inflation though, although next year’s average increase has been capped at the Retail Prices Index measure of inflation, which is 3.1%.
Bank of England policy
The Bank of England’s Base Rate has stayed rooted at 0.5% all year again. Of far greater significance, though, is the Funding for Lending scheme. Cooked up with the Government, the scheme allows banks and building societies to borrow at cheap rates from the Bank. The result? Tumbling mortgage rates, as lenders got their hands on cheaper money.
So good news for people looking to borrow or remortgage. And the low Base Rate has also allowed people with mortgages tracking that to overpay as their monthly repayments continue to be low.
But it’s been a bloodbath for savers, with rates continuing to plummet across the board. Even the end of the tax year, traditionally a time when there’s a flurry of competition for ISA customers, was tumbleweed quiet.
To illustrate this, the top rate on an instant access savings account in January was 2.10%; it’s now 1.60%. Longer-term rates are starting to recover, but are still a long way from where they were at the start of 2013.
The Funding for Lending taps are now being shut off for mortgage borrowers, so the hope is that savings rates will start to creep up. But the Bank of England continues to indicate that its forward guidance that the Base Rate will not rise for at least another couple of years will hold firm.
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More New Year money:
Ten things to ditch this New Year
How to get a pay rise in 2014
What next for inflation and interest rates?
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ONS spend £billions working out where all our money goes. When applying for a mortgage, the advisor will often ask you what your monthly spend is, then tell you what ONS says you will spend. How would they know? Because they make it their business to know everything. At a recent meeting, two ONS execs told us that they knew everything. When a member questioned them over Traveller sites, they said they knew exactly how many people lived on each site, and who they were. Makes me wonder why escaped criminals are so hard to track down and recapture, as all the Police need to do is ring the ONS and ask them where they are...
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How can you have a concept of "average household spending", as in "Average household spending is down from £533.50 a week in 2004/05 to £489 in 2012." There's a huge difference between the spending of a single-person household, and one with two wages/salaries, and even more so with child-related benefits coming in. Perhaps the drop is simply due to more single-person households now, compared to 2004/05. Where does the information come from, measured to 50p? I don't know anyone, other than myself, who keeps tabs on what they spend.
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“Society owes those who have paid into the system, while booting out those who don't. It is good that our government is cracking down on immigrants who cannot contribute to the whole,” When does a genuine claimant become a scrounger? A day, a week, a month or some other arbitrary period long after they are unfortunate enough to lose their income. Most people I know are padding desperately to keep their heads above water, and will often grab the first job that comes along. As for immigrants, why do you think they come here, to get work that others are too lazy or unqualified to do. I personally don’t know any immigrants, but the ones I do see are usually working extremely hard and often in poor conditions.
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02 January 2014