Budget 2023: Who are the winners and losers? How three real households are affected
No matter what’s going on in your life, something in today’s financial statement from Jeremy Hunt will have a real impact on how much money – if anything – is left for you each month to spend on the things you want.
Sky News has analysed the real budgets of three different households to see whether they end up better or worse off.
Linda is going to be better off overall, thanks in part to the continuation of the energy bill price cap, although it might not feel like that, as the government has not extended the Energy Bills Support Scheme.
We’ve not included that in our calculations as it was a planned change rather than anything that came out of today’s announcements.
“We were really relying on that £67 payment, which we’re going to be losing. It’s a lot of money. The cap is good but they’re taking it out with the other hand. I can’t see how I’m going to be better off at all really. I’m gutted,” she told Sky News.
Click here for our budget calculator to see if you are better or worse off
Linda receives a private pension and a Personal Independence Payment (PIP) to help with health issues that forced her to take early retirement in 2017, aged 55.
Linda’s husband Wayne works full-time for an electrical engineering company, and they also receive rent from Linda’s 38-year-old son Anthony, who moved back in last year due to the rising cost of living. Linda also cares for her grandson Jamie for two days in the week, to help out with childcare costs.
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The new energy cap, Linda’s biggest saving, helps all households. When the government first introduced the Energy Price Guarantee it said that at this point it would rise from £2,500 to £3,000, for a typical annual bill, to ease pressure on public funds. It’s now set to stay at £2,500.
Linda is benefiting from an uplift in her disability support payments, however, adding to extra support received last year.
Frozen tax thresholds mean that Linda’s husband will effectively pay an extra £170 in tax next year. As his salary rises with inflation, the amount he can take home before paying tax does not. More on that later on.
Mike ends up worse off overall. He doesn’t mind so much as he’s in a comfortable situation, but was hoping to hear more support for those struggling.
“My concern is not for myself, I’m comfortably off. If fuel bills stay as they are I can survive, if they go up I can take the hit a little bit. People here [in Burnley] on minimum wage can’t afford to heat their homes or feed their kids.
“I was hoping for more support for those people rather than myself. I will rise over the bumps and I have a retirement coming up in a few years.”
Mike owns his own home and is the landlord for two others. He’s comfortable, but that doesn’t mean he’s immune from rising costs.
“Our day-to-day costs have doubled in the last 12 months, fuel costs have gone up 50%. And Liz Truss’s intervention cost me about £60,000 in lost pension pot,” he said.
Like Linda, he benefits from the energy price cap, but he loses out more from the tax threshold freeze. It will cost him more than £300 in real terms over the next 12 months.
Why is the tax threshold freeze so significant? As inflation rises so, typically, do wages. But in real terms, the value of money becomes less.
£10,000 will buy you about 10% less stuff than it did last year, for example.
In the UK you can earn £12,570 without paying tax. Typically that number, and the number at which you start paying a higher rate of tax (£50,270) rise each year to account for the fact that the money is worth less.
They haven’t this year and that affects all taxpayers, but could cost thousands for higher earners. It’s effectively a stealth tax.
Mike’s main concerns around the budget, however, are for those on lower incomes in his area, who he’s seen struggling to pay for the basics or even to feed their children.
“The stabilisation of the tax rate will cost me a bit of money, but I can tighten my belt a bit. People around here like Lianne don’t have more belt to tighten.”
Lianne will end up better off than last year, mainly thanks to the fuel duty freeze. Her husband Damian is also self-employed, he has a removals company so spends a lot on diesel. Once more though, it doesn’t feel like things are getting any easier.
“It’s really testing times, especially being self-employed. I feel we’re always the ones left behind. You’re trying to do well for yourselves but you’re backpedalling all the time,” she told Sky News.
“The government needs to step up and help the working person. Costs are going up and up and up across the board and they make it sound like – because they’re keeping it at a level rate, not increasing it anymore – they’re doing us a favour, but they’re not. People are struggling.”
Lianne and Damian have a four-year-old daughter who started school this year. They won’t benefit from today’s announcement about childcare support.
Before she started school they paid £100 for two days of childcare a week. Lianne had to go part-time with her work because it was unaffordable to pay for more.
What the family lose from the tax threshold freeze is offset by what they gain from an uplift in child benefit, energy prices and fuel prices.
Fuel duty is the amount of tax that the government charges drivers when they buy petrol. When petrol prices started rising the government lowered the amount of tax it gets, per litre, but planned to raise it back again.
The government announced today that they will no longer do that, which is especially important to Lianne’s husband Damian with his driving-intensive job. Raising the duty as planned would have cost the family over £200 more a year.
Prices are still significantly higher than they were before Russia’s invasion of Ukraine, however.
“People are already at breaking point. For people on the borderline, if things get any worse I dread to think what’s to come,” Lianne added.
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The Data and Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.
There is “considerably more doubt” over when future interest rate cuts can take place, the governor of the Bank of England has said.
Andrew Bailey told a committee of MPs that the risks around inflation had gone up and he was “more concerned” about weakness in the labour market.
Bank staff projections expect the main consumer prices index measure of inflation to rise to 4% this year – double the 2% target rate – from its current level of 3.8%. Food prices are proving the main driver currently, with part of the increases blamed on government tax rises on employers.
On the prospects for further interest rate reductions this year, Mr Bailey said: “There is now considerably more doubt about when and exactly how quickly we can make those further steps.”
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Interest rates are elevated to help ease the pace of price growth and cut, when able, to help maintain inflation at the 2% target level.
The governor was speaking after the Bank’s split vote last month that resulted in a quarter point reduction for Bank rate to 4%.
At that time, the governor said that while he still believed that the future path for borrowing costs was still downwards gradually over time, financial markets had since understood that the outlook for the pace of cuts was more murky.
“That’s the message I wanted to get across”, he told the Treasury select committee.
“Now, I think actually, judging by what’s happened, certainly to market pricing since then, I think that message has been understood.”
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A further quarter point cut to 3.75% is no longer fully priced in for this year, according to LSEG data on market expectations.
He was speaking as financial markets continued to see a widespread sell-off of long-dated bonds, largely over fears of rising government debt levels in many western economies including the US and UK.
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Why did UK debt just get more expensive?
The activity has taken the yield – the effective interest rate demanded by investors – in 30-year gilts to a 27-year high this week. Other shorter dated bonds have also risen sharply.
But Mr Bailey urged less of an emphasis on the long-term gilts, as headlines point out that any increase in the cost of servicing government debt is a headache chancellor Rachel Reeves can well do without as she battles to balance the books.
He told the MPs: “It’s important not to … over focus on the 30-year bond rate. Of course, it’s a number that gets quoted a lot, it’s quite a high number. It is actually not a number that is being used for funding at all at the moment.”
Mr Bailey also waded into the continuing row across the Atlantic that sees the independence of the US central bank, the Federal Reserve, threatened by Donald Trump and his quest for interest rate cuts.
He has moved to fire a Fed governor over alleged mortgage fraud and make a new appointment but Lisa Cook, who was appointed to the board by Joe Biden, is fighting his bid to oust her in the courts.
“This is a very serious situation”, Mr Bailey said.
“I am very concerned. The Federal Reserve… has built up a very strong reputation for independence and for its decision making,”, adding that trading central bank independence against other government decisions would be a “very dangerous road to go down”.
After hitting the highest level this century on Tuesday, the cost of long term UK government borrowing has now hit a fresh 27-year high.
The interest rate demanded by investors on the state’s long-dated borrowing (30-year bonds) rose to just below 5.75%, surpassing the 5.72% peak reached on Tuesday, pushing it to a high not seen since May 1998.
It comes as the government auctioned off these long-term loans on Tuesday and was forced to pay a premium to do so.
Issuing bonds is a routine way states raise money.
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As well as meaning the state has to pay more to borrow money, high interest rates on debt can signify reduced investor confidence in the ability of the UK to pay back these loans.
As the trading session continued, the interest rates on long-term government bonds, known as gilt yields, fell back to just above 5.66%, not enough to erase two days of rises.
The benchmark for state borrowing costs, the interest rate on 10-year bonds, also saw rises. The yield rose above 4.8% for the first time since January, before slightly falling back
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Why did UK debt just get more expensive?
The spiked borrowing cost also continued to cause a weakening in the pound.
After an initial fall to a month-long low against the dollar, one pound again buys $1.34.
It means sterling goes less far in dollars than before the latest peak in interest rates on government bonds. On Monday, sterling could buy $1.35.
Sterling dropped to equal €1.14 before easing up to €1.15. Just a few months earlier, a pound could buy €1.19 before Donald Trump’s April country-specific tariff announcements.
So why has this happened?
Government borrowing costs have been rising across the world amid a sell-off in bonds – which prompts investors to look for a higher return to hold them.
High inflation and national debts have increased concern about whether states can pay back the money.
Japan’s long-term borrowing cost hit a record high, while the yield on the US’s benchmark 10-year bond hit the 5% mark for the first time since July.
UK bond yields tend to follow the US.
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Key to easing UK borrowing costs was the announcement of the date of the budget on Wednesday morning.
UK public finances had been a worry for markets as Chancellor Rachel Reeves struggles to stick to her fiscal rules to bring down the debt and balance the budget.
Disquiet around comparatively low growth in the UK economy also played a role.
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