Support package is welcome but, for many households, it won't even come close to offsetting the spate of impending price hikes. Time to take matters into your own hands...
The Government has finally relented and introduced a suite of measures aimed at helping households with rising bills.
Last week, Chancellor Rishi Sunak ditched his previous plan to give everyone a £200 loan that would be repaid over five years, replacing it with a straightforward £400 discount on energy bills.
Thankfully, this version won’t have to be repaid.
There will also be additional help on offer for people on certain benefits.
For example, those on means-tested benefits ‒ things like Universal Credit, tax credits and pension credits ‒ will receive a further £650.
This money will be paid in two instalments, starting in July. Those on non-means-tested disability benefits will receive a further £150.
On top of that, households that receive the Winter Fuel Payment will receive an extra £300 over the winter.
Depending on your circumstances, you will be receiving anywhere between £400 and £1,500 in total through this latest package of help.
This latest package comes on top of the £150 Council Tax rebate that most households will have received in April.
And according to the Treasury, it will be paid for through a new levy on the profits of energy firms, which will hike the effective tax rate from 40% to 65%.
The Treasury reckons this will raise £5 billion this year.
A sigh of relief
There’s no doubt that this package of help will be a relief to many households.
The fact that there is additional help in place for the poorest and most vulnerable is particularly welcome, ensuring that greater financial support ends up where it is needed most.
Paul Johnson, director of the Institute for Fiscal Studies, said that on average the poorest households would now be “approximately compensated for the rising cost of living this year”, adding that the chancellor was “engaging in some serious redistribution from rich to poor - albeit against a backdrop of rising inequality”.
Help merely slows the tide
While the support goes further than may have been expected, it’s still important to be cautious.
Let’s be clear, many households still face an incredibly tough time in terms of making their money go further so that they meet their essential bills, let alone have anything left at the end.
For example, this week also saw Ofgem’s chief executive, Jonathan Brearley, warn that the energy price cap is currently on track to hit £2,800 from October.
That comes after it was already increased by 54% in April, from £1,277 to £1,971 a year.
In other words, the energy price cap is likely to increase by £800 on average later this year, following a £700 hike in the Spring.
For most people, this latest help will take the edge off that increase, but at best it will still sting.
It would be one thing if rising energy bills were the only thing putting our finances under pressure, but that patently isn’t the case either.
Instead, the price we pay for almost anything is rocketing, with inflation now at its highest level in more than four decades.
Groceries are a good example, with Kantar World Panel suggesting that food price inflation has hit levels last seen in 2011, while the price we pay for petrol and diesel is also at record highs.
Our finances are being stretched in ways many people have not seen in their lifetimes.
Take matters into your own hands
Things are not hopeless, however.
It simply means that we all need to take a proactive approach to getting our finances in shape, to ensure that we really are making every penny count.
That means going through your outgoings, to get a better idea of exactly what you are paying for your various services, and whether there are ways to reduce that.
I’ve done it myself, moving my mortgage, switching my mobile phone contract and negotiating a better deal for my broadband.
It can also be a good idea to review the supermarket you’re using and whether you can bag a more budget-friendly budget by switching elsewhere.
Another step worth taking is reviewing your credit cards, and whether you might benefit from the breathing space offered by a 0% card of some description, or through a bank account offering a less punitive overdraft.
None of this is ideal, and it may be that the savings you make from each of these steps is relatively modest. However, they will add up.
The Government support alone is not going to be enough for plenty of families ‒ but if you act now, you can boost your chances of coming through this unhappy period in relatively stable financial health.