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Here’s how Rishi Sunak’s new budget will affect you

Basically: stop being poor!

Now, as ever, feels like a particularly bleak time to live in the UK. As the cost-of-living crisis continues to make itself felt, the Office for Budget Responsibility has said that households face the biggest fall in living standards since 1956 (when records began). Prices have risen by 6.2 per cent in the last 12 months, which is the fastest increase in 30 years, while energy bills are set to rise again this autumn by a staggering 40 per cent.

This is a crisis that has spilled from the pages of newspapers into just about everyone’s lives. You’d have to be pretty well-off not to feel the pinch at least slightly, which is perhaps why this situation has incurred more widespread anger than previous cost-of-living or welfare scandals, which mostly affected the most vulnerable in society. Now, even the middle classes are pretty pissed off.

With that in mind, the announcement of Chancellor Rishi Sunak’s Spring Budget yesterday was a particularly big deal. There has never been a better time for some major, ambitious interventions from the government and broad swathes of the population were crying out for some good news, or at least the smallest bit of reprieve from the ever-tightening squeeze. Whether or not you think Sunak delivered that probably depends on whether you’re a Tory, but a number of major charities, public figures and trade unionists have lined up to slate the budget. These latest measures, and the cost-of-living crisis more generally, are going to affect just about everyone, but many young people will find themselves especially vulnerable: we’re more likely to work low-paid or precarious jobs; more likely to be in debt and less likely to have the cushion of owning property. Below, we outline how exactly you and your friends might be affected.

If you’re in debt, it will probably get worse

The biggest problem with the budget is that it simply doesn’t do enough to address the cost-of-living crisis: to quote Taylor Swift, band-aids won’t fix bullet holes. A depressing and predictable consequence of this is that more and more people will be forced into debt simply to survive. 

According to Tommy Gallacher, a debt expert based in Scotland, the fall-out from the cost-of-living crisis could potentially be even worse than the early stages of the pandemic. If you have debt but don’t consider it to be problematic at the moment, then even a relatively minor disruption to your monthly budget might cause that to change. “It’s probably going to affect the people who find themselves using their credit card two weeks before payday to fill up the car or cover basic costs when they probably wouldn’t have had to before,” says Gallagher.

The problem is how easily this can snowball: if you’re having to use a credit card to meet your basic needs, you might find yourself increasingly worse off month by month. “Your credit card bill is going to be higher and unless your income has gone up, then it’s just going to gradually get worse”, says Gallacher. It’s likely that lots of young people will, by the end of the year, find themselves in several thousand pounds worth of debt without anything to show for it beyond utility bills and the occasional bit of shopping for payday. According to Gallacher, you won’t even need to be on a particularly low income to be affected by this. Through his work, he encounters a lot of mid-twenties professionals on decent-ish incomes who still find themselves burdened with debt, and in light of the cost-of-living crisis, this unfortunate situation is set to become even more normal.

Low-paid workers will be among the hardest hit

Young people are statistically far more likely to be doing badly paid or precarious work. In the UK, 60.9 per cent of jobs that pay below Living Wage are worked by people aged between 18-21, while 20.3 per cent are worked by people aged between 22-29. This means that these age brackets are far more vulnerable to increases in the cost of living, something which the budget has done vanishingly little to address. There has never been a more urgent time to introduce a mandatory Living Wage, but this isn’t even on the cards. 

According to Katherine Chapman, Director of the Living Wage Foundation, employers have a role to play here too. “For many millions, a major issue is that their pay is not keeping up with living costs,” she says. “We urge employers across the UK to join nearly 10,000 who are paying a real Living Wage that meets everyday needs and provides workers, families and businesses with security and stability.”

Student loans will be less manageable

The Spring budget is partly funded by a cash-grab from the UK’s less well-off students. The government has introduced measures that will force more graduates to pay back their loans, changing the rules about when you have to start paying. This means that more lower-income people will have to begin payments, and that they’ll be locked into repayments for longer (previously, it was written off after 30 years, but this has been raised to 40.) This will disproportionately impact poorer graduates, who will find themselves paying a larger chunk of their income than their wealthier counterparts. According to the Office for Budget Responsibility, these measures effectively amount to a tax increase of nine per cent.  But don’t worry: Sunak has also announced that in two years time we’ll get a whole penny (£0.01) off our income tax. Does his generosity know no bounds?

Child poverty looks set to rise

Families, and particularly low-income ones, are already struggling and Sunak’s budget doesn’t look set to change that. “Today the chancellor could have helped millions of families cope with spiralling costs,” says Sara Ogilvie, policy director at Child Poverty Action Group. “But instead he has failed the children who needed him the most. The measures he announced don’t come close to bridging the gap between what the lowest-income families have and what they need, and will leave many stranded in the face of the highest prices in a generation.” Without urgent action, far beyond what has been set out in the budget, we can expect to see more parents in debt, higher levels of hunger and more children and teenagers left without essentials. As Ogilvie puts it, “the government looks increasingly remote from real-life families.”

Benefits have been cut

The biggest criticisms you can level at the budget are about what it hasn’t done. In this case, despite calls from a number of institutions, Sunak has failed to raise universal credit. Because inflation is increasing so steeply, this effectively amounts to a real-terms cut of £633. “The Chancellor should have increased benefits to match inflation – the most efficient way to help hard-pressed households,” says Ogilvie. The fact this hasn’t happened will mean that millions won’t have enough to live on. Local authorities have been given another £500m for the ‘Household Support Fund’ creating a £1bn fund which is intended to help vulnerable people cope with the rising cost of living. However, the scale of the problem means that this sum is so insufficient it’s almost laughable.

It’ll be harder than ever to get on the property ladder

If you’re a homeowner and want to introduce solar panels, heat pumps, roof insulation or any other energy-saving measures, then VAT on all of these will be reduced from five per cent to zero. Sadly, renters will be offered no such treats. There is effectively nothing whatsoever in the budget for them, at a time when millions are facing sharp increases in rent. One particularly egregious failure is that there has been no increase in Housing Benefits, something which housing charities like Shelter and Crisis have said risks exacerbating the UK’s homelessness crisis even further. Even the head of the National Residential Landlords Association has come out against the decision to freeze Housing Benefits. Admittedly, they have a vested interest here – they just want their income to be secure – but it’s still not great for the government to be less of a friend to renters than… landlords.

If you’re planning on escaping from renting and buying your own place anytime soon, there’s more bad news. The Office for Budget Responsibility has predicted that the average proportion of income that is saved is going to fall. Last year, partly due to the pandemic, the average person was able to save 10 per cent of their income. Next year this is going to plummet to 3 per cent. This is going to make it even harder to save up for a deposit, particularly as our rocketing house prices are showing no signs of slowing down.

...are there any upsides whatsoever?

There are a few small silver linings: National Insurance is going to increase but so is the threshold at which people have to start paying it. If you earn less than £34,000 (as the majority of the population do), then you’ll be paying less NI this year: so if you earn £20,000, for example, then you’ll be paying around £180 less. Whether you’ll actually feel the benefit of that considering how expensive everything else will become is another matter. If you drive, there’s also some incredibly meagre good news: Sunak has cut fuel duty by 5p per litre. But given that fuel costs have risen as high as 169 per litre, this is hardly a windfall. 

As far as upsides go, that’s about it. Thank you, Mr Sunak… for nothing!