As the Cost of Living crisis rumbles on, it is only pertinent to explore what has changed as a result of entering April.
Every day there is something happening in this country that impacts how much we, the consumer, pay for our everyday essentials. From fruit and vegetables to energy, I am hopefully going to give an easy to understand cost of living update.
While there are many experts and economists who make predictions and lobby for change, how much of what they tell us do we really understand? Martin Lewis is a great example of someone who provides enormous amounts of information, but even I question how much I really understand as it can sometimes feel like information overload. And many of the things that we read or talk about, don’t actually impact Wales.
We will start with Inflation. In simple terms, Inflation measures how much more expensive a set of goods and services has become over a certain period, usually a year. This is currently at 10.4% but what does that mean? It means that the things in your basket cost 10.4% more than they ordinarily would have a year ago. I won’t go into the factors of this, but essentially we are spending more of our money on the same amount of things. For the majority of us, this means less money to spend on the other things that we may need or want. The UK Government has pledged to reduce the level of Inflation, however in the last review it actually went up.
Mobile phones/ Internet Increase
For many of us, we will be in a 2 year contract with our mobile phone or internet provider. This usually consists of a phone and/or data plan, which essentially means you are paying for the phone/device, plus the Internet, Calls and Text plan. You pay 1 fee but for two things; Phone and Plan. Unfortunately we don’t always read the small print, and then in April every year our bill goes up.
‘But I’m in a 2 year deal, they can’t do that?’
Well, they can because in the fine print of the contract you took out and signed, it states, albeit very small and usually quite far down, that they will increase the bill based on inflation and then they will add their own amount on top for good measure. So April 2023 saw an average 17.4% increase in most people’s mobile phone or internet bill, around 14% for inflation and 3.4% for provider costs, with some providers who previously said they wouldn’t increase actually doing so (e.g. TESCO).
This is a big topic of conversation at the moment. Ovo energy just released their first tariff for existing customers in what feels like a long time. But should customers jump onto the tariff? In short, I would argue no. My reason for this is that there is a very good indication that the cost of energy is falling, slowly, and by July the Government’s Energy Price Cap (EPG) will go down from £2500 for a typical household. What that means isn’t what it suggests though as you can spend over £2500 on your energy bills each year. What it actually means is the amount per KWH (kilowatt hours) is capped at a rate that energy companies can’t go above and this amounts to £2500 for a typical household use. OfGen (the regulator for energy) has its own price cap that isn’t the EPG but sometimes gets confused together. The difference between the EPG and the amount OfGen say energy companies should charge is paid for by the UK Government.
So back to Tariffs, if you take an OVO energy deal today, you will be locked at this price per Kilowatt hour for the next 2 years, and be paying this price if/when the energy cost comes down too. What may feel like a small saving now, for around 3 months, may turn into 21 months of paying higher prices than those who have waited. The good news is that once one company starts with tariffs, the others will start making moves to get people on 2 year deals too. What these deals look like will vary, but let’s just take what we know so far.
Many people will be on a Standard Variable Tariff, essentially the default amount (again in Kilowatts per hour) an energy company charges. This will automatically go down when the cost of energy reduces, so staying on this in the medium term will be cheaper than any deals you see right now. On the other hand this Standard Variable Rate can also increase, you may remember that the Government wanted the EPG to be £3000 from April but backed out after a lot of opposition. It’s also worth mentioning that Energy suppliers aren’t usually the energy producers so aren’t announcing billions in profit but that’s a different blog. And just to add, bills have gone up 40% in April as a result of the Government stopping the £67 a month support package, plunging more people into debt and poverty.
Picking the right time to get onto an energy deal will be crucial, too soon and you will end up paying higher prices for longer, too late and the deals may be gone and you are stuck on the Default Tariff. When new tariff deals come along, you need to look at the Price Per Kilowatt Hour and the Standing charges for the best option, knowing your annual usage will also allow you to accurately compare deals.