Month: October 2022

The amount motorists pay has fallen significantly from the record highs seen at the start of July, but remains high compared with recent years.

Prices have once again started rising, with data from Experian showing a litre of diesel now costing 190.12p on average and petrol at 166.17p.

The AA said the gap between petrol and diesel had widened to 23.95p.

But it expects the price of both to begin levelling off soon, judging by wholesale costs.

Fuel is one factor which has further driven up the cost of living this year, as the rate at which prices are rising is at a 40-year high.

Many people who live in rural areas are particularly feeling the impact, being more dependent on cars for travelling longer distances and with fewer public transport alternatives.

A recent study by the Rural Services Network pointed out transport costs represented a higher proportion of rural households’ income, and bus routes continued to be cut.

In a review, the Competition and Markets Authority said rural communities paid on average 1p-2p per litre more than urban areas.

This is likely to be because forecourts faced less competition, supplied lower fuel volumes and had higher transportation costs.

Richard Morris runs Gloucestershire Gardens, a garden maintenance business. His livelihood depends on being able to travel around the countryside for work, so the cost of diesel is having an impact.

Filling his car plus the motorised gardening equipment in his trailer is costing £240 more per month than last year.

This eats into profits. “I was looking to scale up the business, employ a new member of staff, get another vehicle. But at the moment the times are just too uncertain to be able to do that.”

He’s now started to think twice about taking on jobs if they’re too far away. “I’ve actually turned down work just because the fuel price would be too high to get to the job,” he says.

For the hard-pressed home care sector, driving is also essential.

Joanne Folkes, the manager of Caremark in Gloucester and Stroud, says her firm upped the mileage paid to carers to ensure it covered the cost.

The business manages spend as best it can by tightening up rounds, so travel time and distance are minimised, as well as- trying new methods of transport.

“We’ve introduced mopeds, which is something not everybody is suited to but it’s a very economic way of getting around”, says Joanne.

For many households too, fuel costs remain a burden.

At a community centre in the Gloucestershire village of Cam, we met Joan, Patience and David.

They are neighbours on a mobile home park a 10-minute drive away – which isn’t served by a bus. “You’d have to walk a mile to get to the bus!”, says 89-year-old Joan.

They all love living where they do, but rely on their cars for shopping and getting to social activities like bingo.

These days, fuel is eating into their budgets. David now plans journeys so he gets a few tasks done in one go, instead of making multiple journeys.

And he’s cutting down on non-essential trips. “I used to pop in to Gloucester, which is 15 miles away, but now it’s too expensive. Instead of going out for a ride, you just go to get the essentials.”

Joan says: “You’ve got to cut back, and you think twice about driving. You think ‘I don’t want to use that petrol today'”.

She wants to keep the car as long as possible to maintain her independence, but has started to decide against journeys that don’t feel worth it.

Patience tries to control her spend instead of filling up her tank. “I do what you call a slap and a dash – you just put a little bit in, what you need”.

Today, they’ve car-shared to come for lunch at this centre, called the GL11 Community Hub.

It has started focussing on helping people with the cost of living. There’s advice, digital support, a warm place to enjoy an affordable meal, and a food bank.

There’s also a “the food pantry” – where people pay a small amount for the products they take home. The centre is open until 7pm so people who work during the day can use it too.

The organisation’s CEO, Indigo Redfern, says demand has surged as cost pressures are “coming from every direction”.

She describes fuel prices as “prohibitive”, and says driving is often one of the things people cut down on where they can – which can have a knock-on impact on their quality of life.

Living in a spread-out area can make it difficult for some people to get to somewhere like the GL11 hub, where support is available.

Volunteers from the hub can drive grocery items to people who need them delivered instead, for example if they don’t have a car and need too much to carry on foot.

“[They] are very kindly doing it out of their own pocket”, says Indigo. “We haven’t yet had anyone say to us that they can’t afford to deliver food from our food banks. But I would anticipate that will start to happen.”

More than £4bn meant for development aid will be spent in Britain this year, largely to support rising numbers of asylum seekers and refugees.

This means less money can be spent elsewhere, because the total budget is capped at 0.5% of national income.

The government insists the UK remains one of the largest global aid donors.

The experts calculate the UK will spend only about £3bn in aid money – known as official development assistance or ODA – this year on direct bilateral payments for development and humanitarian projects in poor countries. A further sum, bringing the budget up to the total of roughly £11bn, is given to multi-nation institutions that organise aid efforts around the world.

Aid charities say the changing allocations amount to a further squeeze on the aid budget, which have already been cut in absolute terms since 2020.

The assessment of how much is being spent at home comes from two of Britain’s leading development experts: Stefan Dercon, former chief economist at the Department of International Development and Ranil Dissanayake, policy fellow at the Center for Global Development think tank. Both also used to advise the government.

Under international rules, countries are allowed to spend foreign aid on the domestic costs of asylum seekers and refugees – but only for the first year after their arrival.

This year has seen a massive increase in numbers of people arriving in the UK from Ukraine and Afghanistan, as well as those travelling across the English Channel in small boats.

The Home Office says 140,300 people have arrived from Ukraine so far this year. That figure is expected to rise because 194,300 visas have been granted and thousands more are being considered.

A further 10,000 people have arrived from Afghanistan and, separately, some 38,000 people have entered Britain via small boats.

Paying for their accommodation, subsistence, health, travel and education is hugely expensive. Home Office officials told MPs on the Home Affairs Committee this week that hotel costs alone for asylum seekers and refugees are £6.8m a day. That works out at £2.4bn per year.

One of the experts who carried out the calculations, Prof Dercon, said: “Within the fixed 0.5% ODA budget, the UK is now spending more of its development budget inside the UK than inside poor developing countries. One area in which ODA costs are soaring are the refugee and asylum seekers costs, mainly for Ukraine.

“It means much of what is left will be more cuts to humanitarian spending for African and Asian crises, and less for those things the UK built a reputation for doing well.”

Charities and development organisations such as Save the Children, the ONE campaign, BOND and the Center for Global Development estimate the total costs will be at least £3bn this year.

If other parts of the aid budget already allocated domestically – on research, scholarships, training and administration costs – are included, that means more than £4bn is likely to be spent in Britain.

That would leave about £3bn to spend on direct bilateral aid around the world on programmes focused on economic reform, health and education, climate resilience, and humanitarian projects.

The rest of the roughly £11bn total aid budget is allocated to multilateral organisations such as United Nations agencies and the World Bank.

Government figures about aid spending are not transparent and the experts’ assessment is, by necessity, based on estimates and assumptions of future costs.

But the second expert, Ranil Dissanayake, said: “Though the government is making it very difficult to actually look at the numbers, it’s extremely likely that refugee spending in the UK alone is already higher than the UK’s country specific aid to low and lower-middle income countries.”

Romilly Greenhill, UK director of the ONE campaign, said: “This is a discreet, further squeeze to the aid budget. Spending money on refugees from Ukraine is vital, but the way UK aid is managed means that low-income countries are effectively footing the bill.

She added the UK’s actual budget available to spend overseas is closer to 0.3% of national income than 0.5%.

“And the way the budget is managed means that the Foreign, Commonwealth and Development Office (FCDO) gets what is left after Home Office spending needs have been met. This is not the way to show international leadership or demonstrate our commitment to be a truly global Britain.”The FCDO said: “Across government, there are significant pressures on the 0.5% ODA budget due to the costs of accepting refugees from Afghanistan and Ukraine as well as wider migration challenges. Obviously how many refugees arrive in any particular period is not certain, so there is not a fixed cost.

“We remain one of the largest global aid donors, spending more than £11bn in aid in 2021, and UK aid has recently gone towards those in need in the Horn of Africa and Pakistan.”

Chris Heaton-Harris, the Northern Ireland secretary, now must call an election to be held within 12 weeks.

He has pledged to do that on Friday, rather than try to delay it or avoid it with fresh legislation at Westminster.

The most likely date is 15 December, although a date for a poll does not have to be set immediately.

Mr Heaton-Harris is expected to lay out his plan later on Friday.

The Democratic Unionist Party (DUP) is blocking the restoration of power-sharing in its protest against the post-Brexit trading arrangements called the Northern Ireland Protocol.

Unionist politicians argue that the protocol undermines Northern Ireland’s position in the UK.

It keeps Northern Ireland aligned with some EU trade rules to ensure goods can move freely across the Irish land border.

Chris Heaton-Harris had repeatedly pledged to call an election if the devolved institutions were not reformed.

We can expect him to move quickly. A formal announcement may come as early as lunch time on Friday.

Politicians at Stormont had argued that a new election would not solve the impasse over the Northern Ireland Protocol.

But they are now resigned to the fact they’ll be hitting the campaign trail before Christmas.

As it stands, it is far from clear that the power-sharing government will return on the other side of an election.

The DUP withdrew from the Northern Ireland Executive in February, with ministers remaining in post but with only limited powers.

The executive is made up of ministers from the largest parties under a power-sharing arrangement and is designed to ensure unionists and nationalists govern together.

On Thursday, politicians failed in last-ditch efforts to restore devolved government ahead of the deadline.

Assembly members met at Stormont as Sinn Féin, which won the largest number of seats in the last assembly election in May, called for the DUP to end its protest.

The party’s vice-president Michelle O’Neill, who is entitled to the first minister position after Sinn Féin’s success in May’s election, accused DUP leader Sir Jeffrey Donaldson of a “failure of leadership”.

With the deadline passed, the Northern Ireland secretary must call an election “as soon as is practicable” – to be held within 12 weeks.

Chris Heaton-Harris, who has been in office since 6 September, has consistently said he will call one after the deadline passes.

Stormont’s caretaker ministers were removed from office as of midnight and senior civil servants are now in charge.

The assembly – which has been meeting only for special recalls since May’s election – has also been dissolved.

As the DUP has said it will continue its protest against the Northern Ireland Protocol, the election is unlikely in itself to break the stalemate.

So Northern Ireland could be set for further cycles of negotiations, up to 24 weeks, and future elections until a resolution is found or the law is changed.

But the DUP denounced the assembly meeting as a “flawed and failed attempt” to restore power-sharing.

The meeting failed to elect an assembly speaker, or the first and deputy first ministers, so no government could be formed.

It is the fourth time the assembly has met and failed to elect a speaker since May’s election.

Prime Minister Rishi Sunak had urged the DUP to return to Stormont.

His official spokesman said: “The people of Northern Ireland deserve a fully functioning and locally-elected executive which can respond to the issues facing the communities there.”

Irish Tánaiste (Deputy Prime Minister) Leo Varadkar described the situation as regrettable, urging all parties, particularly the DUP, to “honour their mandate”.

In a meeting on Thursday, they were told that economic growth is forecast to be considerably lower than the last independent forecast.

This means they have a bigger financial “hole” to fill.

An announcement on the plans has been pushed back by more than two weeks to 17 November.

The Treasury would not put a figure on how much the chancellor and prime minister will need to find in the budget next month but the BBC is told it may need to be at least £50bn.

Multiple sources said the amount of money the government needed to raise through spending cuts and tax rises was also more than just this current “hole” in its finances.

This, they said, was because the government needed some “headroom” beyond just getting their existing debt down in case the economy does not grow as much as expected.

And because spending cuts and tax rises in this budget could reduce future economic growth, and therefore future tax revenues, money would be needed to recover that in future.

While government borrowing costs have fallen somewhat in recent days, officials warned Mr Hunt and Mr Sunak that they remain considerably elevated as global interest rates also rise. For example, the interest rate – or yield – on 10-year UK government debt is just over 10 basis points higher than before the mini-budget..

The PM and chancellor agreed that to ensure the package is credible to financial markets, there must also be a buffer – which means a bigger “repair job” than previously expected.

A Treasury source said: “Markets have calmed somewhat, but the picture is still bleak. Britain is facing an economic crisis with a massive fiscal black hole to fill.

“People should not underestimate the scale of this challenge, or how tough the decisions will have to be. We’ve seen what happens when governments ignore this reality.”

Last month, sterling fell to a record low against the dollar as government borrowing costs rose in the aftermath of then-chancellor Kwasi Kwarteng’s mini-budget.

The financial markets plunged into turmoil when Mr Kwarteng announced major tax cuts without detailing how they would be paid for.

But the cost of government borrowing has since fallen back to the level it was at before the mini-budget. The pound also rallied after Mr Sunak became prime minister, and as the dollar fell.

In Mr Sunak’s first speech as prime minister on Tuesday, he said he would “fix” the mistakes made during his predecessor’s time in office.

The PM said he would place “economic stability and confidence at the heart” of his government’s agenda, and promised to show compassion while making “difficult decisions”.

Mr Hunt, who replaced Mr Kwarteng as chancellor after he was sacked by Ms Truss, has already scrapped almost all the tax cuts announced by his predecessor.

But he still needs to find billions of pounds of savings to keep the UK’s debt under control.