Student loans
“This year’s spending review neatly aligns with when the final report on post-18 education will be published, meaning all eyes are on what the Chancellor will do to the student loan system. Currently, only around a quarter of students will repay their loans in full, and this is something the Government could easily change.
“At the moment, graduates pay back their loans at 9% of their earnings above a threshold of £27,288 a year, but the Government could reduce this threshold and drag more people into repaying their loans. If the threshold was reduced to £25,000 it would cost anyone earning more than the current limit an extra £206 a year, while if it was slashed to £20,000 it would cost an extra £656 a year.
“Graduates will pay the new social care levy and so anyone above the existing threshold will already have a marginal tax rate of 42.25% from April. Any more hikes in their costs will be pretty hard to stomach, particularly as younger people were hit harder in the pandemic and are still struggling to recover financially.”
Energy price reform
“Soaring energy prices are at the biggest concern facing most households this winter – and are rapidly becoming one of the biggest problems the Government needs to tackle too. With many families facing the awful choice between affording food or heating this winter after wholesale gas prices rose 250% so far this year, the Government may offer a lifeline to those households.
“They could extend the Warm Home Discount scheme, to allow more people to benefit, or increase it from its current £140. The winter fuel payment could also be increased for pensioners, who spend a large proportion of their income on energy and so will be among the hardest hit this winter. The amount has been frozen for years, but there is precedent as the Government previously introduced a temporary uplift of £50 in 2009-11, although this was under Labour. Of course, the big criticism of these payouts, which already cost the Government £2bn a year, is they go to anyone, regardless of income or wealth, rather than being targeted at those who need it the most. Either measure would almost certainly be temporary for this year.”
Council tax
“All eyes will be on how much funding the Government announces for local councils to spend in the coming year. Dealing with the financial fallout of the pandemic in their communities is a big enough task, but local councils also need to foot the bill for some of the new social care plans announced by the Government earlier this year.
“Put simply, if councils don’t get the funding from Government they’ll have to go to the public and hike council tax. The IFS has already predicted a potential increase of around £240 to average bills in the next few years if more central Government funding isn’t given, and even its best-case scenario sees an extra £160 added to bills in the next few years.”
