Inflation is a £12bn hole in UK government power support, says IFS – Business Live | Business

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Another £12bn is needed to keep support for UK energy bills at the same level, says the IFS

Mark Sweeney

As energy prices rise, the Government will need to spend another £12bn to keep up the amount of support promised to help families cope with the cost of living, according to analysis by the Institute for Fiscal Studies (IFS).

The Economist said more funding was needed to meet the £24bn bailout package announced in May, mainly because forecasts for energy price rises next year rose from 95 per cent to 141 per cent.

This means that Working Age Benefit claimants are on track to see their actual income drop by £620 a year.

The IFS says the government should double the current £650 grant to protect them, as well as help low-income pensioners and working families at a cost of £5.5bn.

Similarly, the cost of maintaining the £150 council tax rebate and £400 energy rebate would cost another £7bn if the government were to cover half of the average household’s rising costs over the course of the year.

Paul Johnsonof IFShe said:

Low-income families are facing more uncertainty and pressure as the price of essentials, including food, heating and fuel, continues to rise. The government is still playing catch-up with inflation and rising energy prices. Just achieving what they want in May would cost an extra £12bn, and a package on that scale would still leave many households worse off.

Good morning, and welcome to live coverage of business, economics and financial markets.

China’s economy is showing signs of slowing, with a series of economic indicators showing industrial production and retail sales growth below economists’ expectations.

Fuel price After the information was published, it fell on Monday morning; Slower economic activity in the world’s second-largest economy could lead to lower oil demand. Brent crude for October delivery fell 0.8 percent to $97.36 a barrel, while North American benchmark West Texas Intermediate fell 0.9 percent to $91.13.

China’s industrial production still grew, but only by 3.8% year-on-year (slower than expected growth of 4.3%), while retail sales rose 2.7% year-on-year, much slower than 4.9%. % expected rate. The data suggested that both industry and consumers may be boosting spending, and there were also signs that China’s property market was struggling. Property has long been a source of growth, but economists have been questioning its sustainability.

He said there was a “less than expected loss of speed”. Craig BohamChief China+ Economist b Pantheon Macroeconomics, consultant. he said:

A slowdown in China’s industrial production supports the narrative that strong performances in May and June are primarily the result of reopening, and if system records are now cleared, Chinese factories will once again be idle.

The People’s Bank of China, the country’s central bank, reacted quickly by slashing borrowing costs for more than a week and a year in an effort to pump more money into the economy.

The cut was a “dramatic move” to cut interest rates to support the economy following “weak” economic data. Mohit KumarManaging Director of Interest Rate Strategy at JefferiesInvestment bank.

Julian Evans-PritchardA senior Chinese economist The economics of capitalThe consulting firm said:

The July data indicated that the recovery from the lockdown had lost steam as a one-time boost to the reopening was disrupted and the mortgage boycott triggered another downturn in the property sector. We think the outlook will be challenging in the coming months as exports turn from a tailwind, assets decline and virus disruptions continue to be a recurring drag.

You can read more on China data here:

In the UK, the biggest news of the day was Labor leader Keir Starmer, who returned from the holidays with a £29bn plan. Reducing energy bills.

The Guardian’s Andrew Sparrow and Philip Inman report:

Starmer said the plan would spend £29bn over the winter and extend the scope of the wind-care tax on energy companies, increasing it by £8bn, to offset the £400 government-provided household subsidy. October’s planned rate hike (£14bn) and lower government interest payments on debt (£7bn savings) is possible because the plan will reduce inflation.

Whether it will reduce inflation in the long term is open to debate, but the move will certainly clear water between Labor and the two Conservative leadership candidates, Rishi Sunak and Liz Truss. Sunac has pledged to spend around £10bn on the crisis, but the Trust has not disclosed the costs of how it will support families. Truss is seen as the frontrunner in the race as she leads the polls among Conservative Party members.

Remember, the government’s response will be seen as a key variable in how the UK economy performs in the coming months. The Bank of England’s forecasts of a prolonged recession and inflation of 13 percent are designed to keep fiscal policy unchanged. This seems unlikely given the large energy price increases expected this winter if wholesale oil and gas prices remain high.