Government sets out plans to cut bills for households

16 Dec 2015

The Chancellor and the Secretary for Business, Sajid Javid have unveiled plans to increase competition in the UK economy to cut down bills for families and firms.

Published in the government’s ‘better deal’ plan, the package sets out measures to reduce bills for banking, water, energy, school uniforms, broadband, car insurance, legal services, medical services and mobile phones.

In total, they estimate the package of measures could help households save about £470 per year.

The current household bills can run to a shocking figure of £9,685 per year on average – 40 per cent of disposable income:

Household Bill

Average costs per annum

Housing (including mortgage repayments) £4,880
Energy £1,280
Clothing £1,180
Insurance £875
Telecoms £725
Water £385
Health products and services £325
Legal and Banking £35

Total

£9,685

The Chancellor said:

“This broad package of reforms will make markets work better for families. Driving competition will improve choice for people and ensure they get a better deal.

“It’s the government’s responsibility to help foster the right conditions for competition and investment across the UK – that’s why the concrete steps we’re announcing make sure government, regulators and local authorities all play their part in promoting competition and removing market distortions.”

What does the package include?

Water

From 2017 households will be able to switch their water supplier. Ofwat, the water regulator, will conduct an assessment to see if it’s beneficial to extend retail competition to water customers and the government will work to complete the transition by the end of the parliament.

Banking

The Government aims to boost competition in banking by establishing a New Bank Start-up Unit in January 2016 to make it easier for new banks to enter the market. It will also take steps to facilitate the switching of bank accounts including ISAs- which can save a customer on average £70 a year.

Broadband

The broadband market has been under heavy criticism for lacking transparency as total costs can be £240 a year higher than the headline introductory rate. The action plan sets out that the Advertising Standards Authority (ASA) will look into if teaser rates on broadband deals are misleading customers and ASA will take action to ensure prices are made clearer and costs are not hidden.

School Uniforms

A 2015 Department for Education survey found that nearly one-fifth of parents and carers reported that they had suffered financial hardship as a result of purchasing their child’s school uniform. It will also put existing best practice guidance for school uniform supply in England on a statutory footing. This will ensure that schools deliver the best value for parents by avoiding exclusivity arrangements unless regular competitions for suppliers are run.

Legal Services

To reduce the cost of legal fees when buying a home the government will further reduce barriers so that it is easier for alternative business structures, such as supermarkets and estate agents, to offer legal services like conveyancing, probate and litigation in England and Wales. The government plans to launch a consultation by spring 2016 on removing barriers to entry for alternative business models in legal services, and on making legal service regulators independent from their representative bodies.

Motor Insurance

The government intends to end the right to cash compensation for minor whiplash injuries, removing over £1billion from the cost of providing motor insurance, equivalent to an average of £40 to £50 saving for each motor insurance policy.

Energy

By switching suppliers the average household can save £160 a year. The government will launch a switching guarantee in the first half of 2016- similar to that in current accounts – for the energy sector; and working towards a similar guarantee in communications markets to be in place as soon as possible. As set out at the Spending Review and Autumn Statement 2015, the government is reducing the projected cost of green policies on the average annual household energy bill by £30 from 2017.

Mobile Phones

The government recognises that consumers can face costs up to £20 to unlock their phones. The government will consult in 2016 on ending the practice of handset locking for customers outside any initial contract period. Osborne is demanding that mobile phone companies immediately unlock customers’ handsets when their contract expires, in a move that would save users a total of £48million a year.

Which? executive director, Richard Lloyd, welcomed the government’s plan to help consumers get a better deal through more competitive markets. He said “Hidden charges, confusing contracts running to dozens of pages, and complicated switching are still too common in markets we all rely on. By making it easier for consumers to save time and money, these reforms are good for people, businesses and growth in the economy.”

The Competition and Market Authority (CMA) has also welcomed the plans and announced its intention, as confirmed in the plan, to undertake an analysis of price comparison websites during 2016.

Alex Chisholm, CMA Chief Executive, said:

“Price comparison websites are an important tool for customers when choosing suppliers or products in many different markets – indeed they have featured prominently in several of our recent investigations. It is therefore a fitting time to look at these in the round. The growth of such websites has given customers a powerful ally in searching for and choosing the best deals.”

On school uniforms, he said: “School uniforms are an unavoidable purchase and exclusive agreements with retailers push up prices for hard pressed parents. We’re delighted that the government is backing up our continuing efforts with a clear direction that parents should be given a choice.”

Read the latest blog post by Simon Hopkins, Chief Executive of Turn2Us, on how you can help families who are struggling with their energy bills.