Six major money changes are set to be rolled out in the UK in October, including new Department for Work and Pensions (DWP) powers targeting benefit claimants and VAT being removed from electricity bills. The changes begin from tomorrow, with the latest Ofgem energy price cap increasing to a three-year high on Thursday.
The announcements follow Andy Burnham's first Labour Party conference speech on Tuesday (September 9), in which he promised to put the country on a new path and pledged to tackle issues politicians "usually avoid" in order to "bring back hope" for families struggling with the cost-of-living crisis. One of his new plans is to remove VAT from domestic electricity bills from October 1, which is expected to reduce the annual Ofgem price cap by around £45.
Energy price cap and new vaping duty
The energy price cap is predicted to rise by four per cent later this week for a typical household in England, Scotland and Wales, just as cooler temperatures see many switching on their central heating. The increase will see the energy bill for the average household paying by direct debit for gas and electricity reach £1,723, up £5 a month or £60 a year if this level was sustained over 12 months - a three-year high. Ofgem said the increase reflected higher wholesale gas prices as a result of the ongoing conflict in the Middle East, with volatile global markets remaining the dominant driver of price changes.
In October, the government will also introduce a new Vaping Products Duty (VPD) - a new excise duty on all vaping products. VPD will be set at £2.20 per 10ml of vaping liquids. At the same time, the government will hike Tobacco Duty, but there will be an additional increase to ensure smoking cigarettes remains the less affordable option. Tobacco Duty will be hiked by the RPI plus two per cent, as well as an additional £2.20 per 100 cigarettes, or per 50g, equivalent to the new VPD.
The government said it was bringing in the additional increase on Tobacco Duty to ensure that the cost of smoking remains higher than the cost of vaping, which is seen as less harmful. Explaining the duty changes, the government said it is "committed to reducing the affordability and appeal of vaping products, particularly among young people and non-smokers, while maintaining the financial incentive for smokers to switch to less harmful alternatives."
New DWP powers and VAT removal
The Department for Work and Pensions (DWP) has a string of new powers coming into force from October as part of a crackdown on benefits fraud. As part of a new welfare crackdown announced in June, people who refuse to pay back benefit debts could be banned from driving. It comes as part of planned Government efforts to try and save up to £14.6bn over the next five years from benefit fraud, error and debt. The DWP has been writing to thousands of people with outstanding debts, warning them of the consequences if they do not settle up.
Under the new measures, the DWP can now seize cash directly from people's bank accounts without need for a court order. In the most serious cases, when welfare debt is more than £1,000 and there is no working need for a car, someone's driving licence can be revoked via a court order. Though the powers come into law in June 2027, they will start being used from October, with the aim of giving debtors a chance to pay up, or sort out a payment plan ahead of time.
Andy Burnham announced earlier this year that VAT will be removed from domestic electricity bills from October 1 in his first major policy since entering Downing Street. Currently, suppliers add up the amount of electricity used in a given period, along with your daily electricity standing charge, and apply 5% VAT to that part of the bill. Starting next month, this requirement will be removed. The £850 million tax cut will be funded by cancelling the Digital ID programme and is expected to reduce the annual Ofgem price cap by around £45, Chancellor John Healey confirmed.
Inflation data and Budget date
Next month's inflation data from the Office for National Statistics (ONS) are scheduled to be released on October 21, revealing how costs have shifted in recent months. In the latest ONS publication, inflation was demonstrated to have risen to 3.1% in the 12 months to August, up from 2.9%.
The new Chancellor John Healey will present his first Budget on October 28. Mr Healey insisted earlier this month that the UK economy is "turning a corner" as he promised to control government spending in next month's Budget. In his first major speech since taking over at the Treasury, Mr Healey acknowledged the impact of high government borrowing costs and promised to address the rising burden on businesses.
