Europe and the Cost-of-Living Crisis
Households across the UK need help grappling with the cost-of-living crisis. Over 8 million households that receive income-related tax credits and benefits qualify for a payment of £650. There is also a £300 payment for pensioners and £150 for people with disabilities. This winter, all households will receive a £400 discount on their electricity bills. Additionally, many households within A-D bands have received a council tax rebate of £150, although some are still waiting on the payment.
The UK government has taken other steps to cushion the impact of inflation and soaring living costs. For example, the Great British Rail Sale earlier this year saw around one million train tickets be discounted by up to 50%. In addition to this, a recently unveiled cost-of-living package includes discounts on products and services from companies like Asda, Amazon, Vodafone, and Morrisons.
Many European countries have introduced tax reductions. The UK, however, is the only major economy that has increased taxes for working people. National Insurance has increased, which will disproportionately affect lower- and middle-income earners.
Crisis talks between the government and energy sector bosses are set to take place today, August 11.
Of course, this crisis is not unique to the UK. How is Europe coping with it, and which countries have put plans in place to mitigate the effects of rising cost-of-living?
Spain reduced VAT on electricity bills twice last year from 21% to 10%. This year, they dropped it again to 5% to adjust for the severity of the crisis.
In late June, measures were introduced to raise pensions for vulnerable people, like widows and people with disabilities, by 15%. Additionally, certain people with small incomes (less than €14,000) will receive a €200 payment.
Recently, the country announced that from September 1st, travel across certain parts of Renfe, the nationally owned railway service, will be free. This comes after a previous policy which cut public transport fares by 30%. This new policy is specifically meant for Spanish residents with season tickets, but tourists can also take advantage of it by buying multi-journey tickets.
Gas canister prices will not increase for the rest of the year.
Since the start of the year, Ireland has introduced measures that have put an additional €480 back in the pockets of the average person. The country has provided citizens with energy credits and reduced tax on fuel, electricity, and gas. In April, households received an energy credit of €200. Soon after, the government announced VAT cuts, which will ultimately save households around €70 on electricity and €50 on gas. The country also cut fares for public transport. All fares were cut by 20% for everyone and by 50% for young people aged between 19 and 23.
Ireland is one of the most expensive countries in the EU. However, the government says the measures included in the 2021 October budget, like an increase in the weekly pension, anticipated the issues catalysed by the crisis.
Germany alleviated some cost-of-living pressures when they passed various measure in July. They introduced a public transport ticket scheme where all modes of regional and urban transport were covered by paying just €9 a month. The purpose of this was to encourage commuters to travel by public transport instead of driving their car. It also helps those who rely on public transport for getting around. The reduced fare offer ends on August 31.
From June to August, the German government also cut fuel taxes, which accounts for half of the total price of fuel. Despite the fact that studies have shown that fuel companies have passed these cuts on to their customers, prices are still much higher than they were this time last year.
There are also some one-time payments. People who are gainfully employed or self-employed will receive €300. Those on social welfare will be given €200. Single person households who receive housing benefits will receive a subsidy of €270 per month. This number will rise to €350 for two people. Thereafter, an additional €70 will be granted for every extra person in the household.
Lastly, larger households were paid €100 for each child during the month of July.
In January, the government said the energy company, Electricity of France (EDF), would only be allowed to increase bills this year by up to 4%. There was also a rebate on diesel and petrol of 15 cents per litre.
Now, the country is in talks to fully nationalise EDF. This will help bolster supplies domestically, as well as prevent bills from increasing even more than they already have. This will cost the government billions of euros.
If the French government is successful with this plan, they will make certain investments that will help reduce how dependent the country is on fossil fuel imports.
Additionally, citizens with a monthly income of less than €2,000 before tax were given an “inflation allowance”. This consisted of a one-time payment of €100.
Develop a comprehensive financial plan
During this time of high inflation and soaring monthly bills, it is crucial to put a financial plan in place. Contact us today to speak with a qualified Wealth Manager about pensions, inheritance tax, retirement and estate plans, your investment portfolio, and how to protect against the cost-of-living crisis.