Cost Of Living: National Insurance Rise Hits Pay Packets, After Record Fuel Price Rises – Business Live

German factory orders have fallen for the first time in four months, highlighting concerns that Europe’s largest economy could be slowing.

Orders at German manufacturers dropped by 2.2% in February, in the run-up to Russia’s invasion of Ukraine (on 24th Febrary).

That’s much worse than forecasts of a 0.3% decline, led by a drop in foreign orders.

The supply chain disruption, and soaring commodity prices, since the Ukraine war began has intensified pressures on German factories, on top of pandemic disruption.

As Bloomberg explains:

Companies including BMW, BASF and ThyssenKrupp have already warned that their earnings will slip. On Monday, Deutsche Bank chief executive Officer Christian Sewing said a recession “would presumably be inevitable” if Germany was cut off from deliveries of Russian oil and natural gas.

Before the invasion, the economy had been grappling with the latest wave of the pandemic. Restrictions have now been loosened, though the caseload remains elevated and Health Minster Karl Lauterbach has urged citizens to remain cautious.

There are worrying signs today that China’s economy has weakened, after the rise in Covid-19 cases led to new lockdowns.

Activity in China’s services sector shrank in March, at the sharpest pace since the first lockdowns in February 2020, according to the latest PMI survey of businesses from Caixin.

Caixin says that the latest wave of Covid-19 and the Russia-Ukraine war both hit China’s firms last month.

That tallies with surveys last week, showing that China’s factory sector contracted last month as the Ukraine conflict disrupted the global economy, and new restrictions were imposed in several cities such as Shenzhen and now Shanghai.

Joanna Partridge

Serious shortages of workers in the food and farming sector as a result of Brexit and the coronavirus pandemic could push food prices even higher, adding to the cost of living crisis.

The chronic worker shortage could also lead to more food being imported into the UK, and also lead to price increases, reduced competitiveness, and higher wages as food producers try to recruit staff.

MPs on the environment, food and rural affairs committee reported that the sector had half a million vacancies in August last year, representing an eighth of all roles.

The huge labour shortages in the food industry have led to unharvested crops being left to rot in fields, the cull of healthy pigs on farms because of a lack of workers at meat processing plants, and disruption to the food supply chain, as well as threatening the UK’s food security.

The committee – which is chaired by the Conservative MP Neil Parish, along with five other Conservatives, four Labour MPs and one Scottish National party colleague – wrote in a report that the workforce shortfall was the “single biggest factor affecting the sector”.

The food industry is the UK’s largest manufacturing sector but MPs issued the stark warning that it could shrink permanently if the government does not address the acute labour shortages.

Here’s the full story:

The calorie content of dishes are being displayed on menus from today as part of a Government drive to tackle obesity and improve the nation’s health.

Businesses with 250 or more employees in England, including cafes, restaurants and takeaways, will be required to display the calorie information of non-prepacked food and soft drinks prepared for customers.

Calories will need to be displayed at the point of choice for the customer, such as physical menus, online menus, food delivery platforms and food labels.

The government argues that the move will address health problems, with obesity-related illnesses costing the NHS around £6bn per year, it says. Almost two-thirds (63%) of adults in England overweight or living with obesity. Putting calorie counts on menus could help people make “healthier choices”.

Some food chains, such as Wetherspoons, do already publish calorie counts, so making it compulsory for larger companies could potentially encourage food producers to make their products healthier.

But the move has been criticised. Tom Quinn, director of external affairs at Beat, said the eating disorder charity was “extremely disappointed”.

“We know from the people we support that including calories on menus can contribute to harmful eating disorder thoughts and behaviours worsening.

“For instance, it can increase a fixation on restricting calories for those with anorexia or bulimia, or increase feelings of guilt for those with binge-eating disorder.

Households and businesses have also been hit by the biggest monthly jump in motor fuel prices in at least two decades.

Average UK petrol and diesel pump prices increased by 11p and 22p per litre respectively in March, according to the RAC’s Fuel Watch.

This is the largest monthly price rise recorded since the RAC started monitoring prices in 2000.

Fuel prices rose to record highs in recent months, meaning the cost of filling a family car with petrol was a third higher in March than it was a year ago, while a diesel car cost 40% more.

It now costs nearly £90 to fill a 55-litre family petrol car, £6.38 more than it did at the start of March and £22 more than a year ago.

Last month, Rishi Sunak announced a 5p/litre cut to fuel duty. But average petrol and diesel prices have only fallen by a disappointing 3.73p and 2.61p respectively since, because rising wholesale oil prices pushed up prices at the pump.

RAC fuel spokesman Simon Williams said:

“March 2022 will go down in the history books as one of the worst months ever when it comes to pump prices – over the 22 years we have been monitoring pump prices as part of our Fuel Watch initiative we’ve never witnessed such extreme rises in prices over such a short period. To describe the current situation facing drivers at the forecourt as ‘bleak’ is therefore something of an understatement.

“Without question, these figures show in the starkest possible terms just how much fuel prices are contributing to the cost-of-living crisis which will be affecting households up and down the country. We know that so many drivers depend on their vehicles – for instance, because of a lack of feasible alternatives – so fuel prices must be starting to have an enormously detrimental effect on people’s finances, especially those on lower incomes.

The Unite union has also criticised today’s NI rise, arguing the government should increases taxes on firms who have profited from the pandemic and the surge in energy prices.

Unite’s general secretary Sharon Graham said:

“Once again working people are being made to pay for the bad decisions of those in power. Workers and their families are hurting now, hit by rocketing inflation. Some are worrying whether they can afford to heat and eat.

“So why has the government ploughed ahead with an unnecessary rise in National Insurance? Why isn’t it taxing the vast profits piled up by the pandemic profiteers and energy producers who are awash with cash? Unite’s commission on profiteering will shine a spotlight on those who should really be targeted by the Treasury.

Liberal Democrat leader Sir Ed Davey has criticised today’s NI rise – saying there are fairer ways to raise funds for the NHS:

He told BBC Breakfast that:

“It doesn’t tax the unearned income of very wealthy people. It doesn’t tax the income of landlords. It puts all the burden on working people – that is wrong.

“Yes, we need more money for the NHS and social care. The Conservatives starved it of money and one reason why the pandemic was so difficult was that the Tories had underfunded the NHS.

On Good Morning Britain, Davey argued that it’s “simply the wrong time” to raise taxes, given the inflationary squeeze on households.

He points out that the Liberal Democrats argued for a 1p increase to income tax at the last election in 2019, to provide more funds for the NHS.

The Health Secretary has defended the decision to hike up national insurance for millions of workers, saying it is “right that we pay for what we are going to use as a country”.

Sajid Javid told Sky News:

“It kicks in today, the new health and social care levy. All of the funding raised from it is going to go towards the extra £39bn we are going to put in over the next three years to health and social care.

“It’s going to pay in the NHS for activity levels that are some 130% of pre-pandemic, it’s going to be nine million more scans, tests and procedures, meaning people will get seen a lot earlier.

“Why is any of this necessary, whether it is for health or social care? It’s because of the impact of the pandemic. We know it is unprecedented. It has been the biggest challenge in our lifetime. The impact of that is going to continue for many years.”

Javid says that increasing taxes on workers and businesses is fair – because the money to fund public services comes from either taxation or borrowing. He argues that higher-earners will pay the most (because they earn more).

You raise it directly for people today, that’s through taxes, or you borrow it, which essentially you are asking the next generation to pay for it.

“I think it is right that we pay for what we are going to use as a country but we do it in a fair way. This levy, the way it is being raised is the top 15% of earners will pay almost 50%. I think that is the right way to do this.”

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

The financial pressures on many UK households and businesses have intensified today, as national insurance rates are lifted to raise funds for the NHS and social care.

Despite the cost of living crisis, the government has pressed on with its manifesto-busting 1.25 percentage point rise in national insurance, announced last September.

The move means millions of workers will begin paying higher National Insurance contributions from today, the start of the new tax year.

Businesses will also see their contributions rise, at a time when they’re already juggling rising costs. Tax rates for dividend income also rise by 1.25 percentage points.

Businesses groups, unions and some Conservative MPs had all pushed the government to delay the increase, given the financial pressures on workers and companies.

The “Health and Social Care Levy” is expected to raise around £12bn per year, to tackle the backlog of cases at the NHS due to the pandemic, and also reform routine services.

Today’s changes mean those earning above £9,880 will now be liable for 13.25% NI contributions, up from 12%. Earnings above £50,270 will be charged a rate of 3.25%, up from 2%.

But from July, national insurance will only start to be charged on earnings over £12,570, because chancellor Rishi Sunak announced a £3,000 rise in the NI threshold in last month’s spring statement. That will take around two million workers out of direct tax altogether (if they earn less than £12,570 per year).

According to Resolution Foundation, everyone earning less than £32,000 a year will be better off from the combination of those two policies from July.

But there are other changes kicking in for the new tax year, including a freeze on income tax thresholds. That will drag more people into paying tax, or more tax, if their pay increases over the next few years.

That will make it harder for households to handle rising costs, such as last week’s surge in energy bills.

Prime minister Boris Johnson has defended the National Insurance increases, saying the health service needs the extra resources:

We must be there for our NHS in the same way that it is there for us. Covid led to the longest waiting lists we’ve ever seen, so we will deliver millions more scans, checks and operations in the biggest catch-up programme in the NHS’ history.

We know this won’t be a quick fix, and we know that we can’t fix waiting lists without fixing social care. Our reforms will end the cruel lottery of spiralling and unpredictable care costs once and for all and bring the NHS and social care closer together. The Levy is the necessary, fair and responsible next step, providing our health and care system with the long term funding it needs as we recover from the pandemic.

The government says the levy means:

• From today the Health and Social Care Levy will begin raising billions to tackle Covid backlogs and reform routine services
• £39 billion over the next three years will put health and care services on a sustainable footing
• Levy will deliver biggest catch up programme in NHS history and end spiralling social care costs

The agenda

• 7am BST: German factory orders for March
• 9.30am BST: UK construction PMI report for March
• 3.30pm BST: EIA weekly US oil inventories
• 7pm BST: US Federal Reseve publishes minutes of latest meeting