April will bring cost increases set to hit household bills and businesses, even as Sir Keir Starmer touts Government measures “bearing down on the cost of living”.
The Prime Minister pointed to the reduction of energy bills by £117 a year for the average household, a rise in the national minimum wage to £10.85 and in the national living wage to £12.71, the start of the £1 billion crisis and resilience fund helping vulnerable households with soaring heating oil prices, and a freeze on prescription prices.
Sir Keir said: “In an uncertain and volatile world, it is my Government’s duty to protect the British people at home and abroad.
“I know the public are concerned about the conflict in Iran and what it means for them and their families.
“I want to reassure them that they have a Government on their side, working with allies on de-escalation and bearing down on the cost of living.
“Today, millions of people up and down the country will see energy bills go down by £117, wages go up for the lowest paid, and more support will be available for people who need it most – because of the decisions this Government has taken.
“But we must go further to bear down on costs, and that means pushing for de-escalation in the Middle East and a re-opening of the Strait of Hormuz. That is the best way we can bring down the cost of living for families and that is my focus.”
While energy bills are falling – for the time being at least – hikes to council tax, water, broadband and mobile phone costs are threatening to stretch many households to breaking point, charities have said.
The price most households pay for energy under regulator Ofgem’s price cap will fall by by 7%, or £117 a year, to £1,641 from Wednesday, driven by the Government’s promise to cut bills by an average of £150 by removing green subsidies.
But there are mounting concerns about the amount energy bills could rise by from July as a result of the Middle East conflict, with latest predictions suggesting this could be £300 a year.
Meanwhile, businesses, which are not protected by a price cap, are set for painful increases in their gas and electricity tariffs from April as the Iran war and disruption to key shipping routes sends wholesale prices soaring.
Respected energy analyst Cornwall Insight has said electricity costs for businesses have increased by between 10% to 30% since the conflict began in late February, while gas prices have soared by between 25% and 80%.
Even before the start of the US-Israeli campaign against Iran, 93% of hospitality businesses said energy costs were impacting profitability, according to UKHospitality.
The trade body warned that increases to employment costs and business rates from Wednesday will cause job losses and harm business viability.
In a member survey carried out by UKHospitality in February with other trade associations, 64% of hospitality businesses said they would slash jobs as a result of the cost increases, 51% said they would cancel investment plans, and 42% said they would reduce trading hours.
Around one in seven venues could be forced to close.
The rises in national minimum wage and national living wage highlighted by Sir Keir represent a £1.4 billion additional annual increase for hospitality businesses, the body said.
And it estimated that the average hike to business rates for a hotel in England totals £205,200, and £14,300 for a restaurant.
“Hospitality’s tax burden – the highest in the economy – is suffocating the sector,” UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping and Hospitality Ulster said in a statement.
“The worrying situation facing the business energy market has the potential to accelerate all of these impacts.”
The Government “should be prepared to support vulnerable businesses if they are thrown into yet another crisis”, they said.
Business rates receipts UK-wide are expected to increase by £3.4 billion to £37.1 billion in 2026/27, according to global tax firm Ryan.
Last November, the Treasury announced changes to business rates which introduced a lower multiplier used to calculate the commercial property tax.
This was more than offset by the removal of a Covid-era 40% discount to business rates bills for hospitality, leisure and retail businesses, as well as updates to rateable values – the property valuations that the tax payments are based on, which come into force on Wednesday.
“This is a significant increase in business rates receipts driven by inflationary uprating, an allowance for losses on appeal and the withdrawal of Government support for the retail, leisure and hospitality sectors rather than the effects of the revaluation itself,” Alex Probyn, principal and practice leader at Ryan, said.
“Even with transitional caps in place limiting increases, those increases will still compound and bills can more than double by the end of the cycle.”
The national minimum wage rise drew praise from some quarters.
Rachel Harrison, GMB union national secretary, said: “A wage rise for millions of the lowest paid workers – including hundreds of thousands of young people – is exactly what this country needs.
“Putting more cash in people’s pockets is the best way to ease the cost-of-living crisis and grow the economy.”
Baroness Philippa Stroud, chair of the Low Pay Commission, which recommended the change, said: “The recommendations we made last autumn sought to balance the need to protect the economy and labour market, whilst providing a real-terms increase for the lowest-paid members of society.
“A lot has changed since we gave our advice to the Government last autumn, and we are now beginning to gather evidence for recommendations later this year. The current economic uncertainty makes it essential that the Commission hears from those affected by the minimum wage and builds consensus for evidence-based recommendations.”