Can we turn the heating on yet?
Autumn seems to have arrived about a month early according to the weather, and the return to school beckons. Makes you want to reach for the heating controls, although you may have seen that household fuel costs are set to rise. More can be found here: https://www.bbc.co.uk/news/business-58106105
This autumn may well see some financial pressures coming forward and keeping an eye on household budgets may be well worthwhile, as our government tries to control its own position. Some may be aware that historically, government borrowing costs are low but rising, however, some may argue that with 99.7% of Gross Domestic Product (GDP) now having been borrowed, and still climbing, interest costs are going to have to remain low to be affordable. Although understandable to cope with the crisis of the pandemic, this is the highest level of government borrowing since 1961. This will make the Chancellors financial statement, usually expected around November each year, ever more interesting not only as he balances the books, but also seeks to start the process the mechanisms to repay the debt. Speculation this year we believe will be significant but will only be clarified on the day, with some believing that a higher dose of inflation would at lease help the government in reducing the effective real value of the debt.
Talking of inflation, many will also be aware that inflation is on the rise, with the consumer prices index reaching 2.5% in July 2021. The Bank of England’s inflation target rate is 2.0%, and they have provided comment that they may, they believe temporarily, see this rise to 3-4%, before heading back down. It will be noteworthy to see if this is temporary, as they believe, noting that they can use bank base rates (currently 0.1%, the lowest ever) to control inflation rates if they remain stubborn. Recent fuel price rises, both for home and car, may well add to this upwardly mobile mix, seeing costs rising as we approach the end of 2021.
Overall, as you might anticipate, the financial markets remain as busy as normal and are likely to remain so during the autumn. Be mindful that costs are rising, in some areas (building supplies) significantly, and taxes might do the same if the Chancellor starts to take control of the debt that has been accumulated.
A regular review of household budgets is of course worthwhile to make sure that you are ready for the months ahead.