Sunday, December 5, 2021

What does the budget mean for your personal finances?

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Rishi Sunak promised to create a new post-Covid economy characterized by higher wages and higher skills, citing better-than-expected numbers for economic growth and unemployment.

He was also keen to acknowledge that the big numbers mean very little to most people – what really matters is whether government decisions improve individuals’ lives. So did the Chancellor deliver?

Public Service Salary

What’s happening? A wage freeze for around five million public sector employees, including nurses, teachers and members of the armed forces, is ended.

What does it mean? The salaries of civil servants are set to rise over the next three years in this Parliament, but it is not clear by how much.

We don’t even know if the hikes will outperform inflation. This is decided by recommendations from independent salary review bodies as part of a “normal salary determination process”.

What we do know is that the wages of many public sector workers have fallen in real terms since 2010 and the NHS is facing a staffing crisis.

With the cost of living rising and set to rise, this move was almost inevitable. The wage freeze would have meant an effective cut in the wages of key workers who were at the forefront of the fight against Covid-19.

National Living Wage

What’s happening? The hourly minimum wage for people aged 23 and over will be increased from £ 8.91 to £ 9.50. The tariffs for younger employees will also rise.

What does it mean? A 6.6 percent raise will raise the minimum wage for two million people. However, it is being eaten up by rising prices. Inflation is projected to hit 5 percent, in part because of rising labor costs, but more importantly because of global supply chain problems, which hopefully will subside as the economy adjusts to post-pandemic reality.

Households are also struggling with energy prices soaring 12 percent, with another increase almost certain to come in April. Cuts in universal credit and increases in social security and income taxes will burden households more than an increase in the minimum wage will help.

Some companies that rely on poorly paid employees, such as the hospitality industry, say this is the last thing they need given all the other cost pressures they face. However, wages in this and other sectors are already rising due to labor shortages.

Universal credit

What’s happening? The rate at which universal loan payments are cut when an applicant gets a job or works more hours changes.

What does it mean? From December 1st, people applying for a universal loan will take home more of their wages when they find work or increase their working hours.

The Chancellor has reduced the so-called taper rate. Under the current system, for every £ 1 earned above a performance threshold, an employee loses 63p. The taper rate is reduced by 8 percent from 63 percent to 55 percent.

That doesn’t make up for the £ 1,000 a year universal credit cut this month, however, after the government scrapped a £ 20 a week hike introduced during the pandemic. The latest change is only helping less than a third of the people who lost the 20 pound survey.

For example, a single parent on part-time minimum wage will still lose £ 361 the next year.

About one in five universal loan recipients affected by the cut will be unable to work and will not increase their income due to the change in the interest rate or the increase in the minimum wage.

The basic security rates are still among the least generous of all affluent economies and are at their lowest level since 1990.

Fuel tax

What has changed? Nothing. The tax on gasoline and diesel was frozen for the twelfth time in a row.

What does it mean? Drivers will stop paying taxes on refueling after Rishi Sunak canceled a planned 2.8p fuel tax hike. The tax remains at 57.95 pence per liter.

Drivers will continue to struggle with rising pump prices. The cost of a liter of unleaded gasoline peaked at 142.94 pence on Sunday – an increase of 30 pence this year. Diesel is on the verge of a record high.

As prices have risen and the fuel tax is flat, the proportion of taxes in total fuel costs has decreased. This may be popular with motorists, but it’s controversial as the UK prepares to welcome world leaders to the Cop26 climate summit in Glasgow this weekend.

Flying

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