How this week’s financial news affects you: From Rishi’s race to No.10 to McDonald’s cheeseburger price increase

Sarah Davidson

Published August 1, 2022 8:00am Updated August 9, 2022 3:53pm

Rishi Sunak and Liz Truss are vying to lead the country, while the cost of a McDonald’s cheeseburger has gone up; Virgin Money’s M Account could give your bank balance a boost (Picture: Getty)

In the past seven days, Rishi Sunak has promised to scrap VAT on energy bills, another interest rate is looming on the horizon, and McDonald’s has upped the price of its cheeseburger for the first time in 14 years.

But what does that all mean to you?

In the latest instalment of our Making Money Make Sense series, consumer champion Sarah Davidson breaks down the numbers and news that matter.

This is everything to know.

Scrap that

Prime Minister hopeful Rishi Sunak has promised he will scrap VAT on energy bills, currently 5%, for a year from October if he wins and the autumn energy price cap goes up to more than £3,000.

Critics instantly branded it a ‘screeching U-turn’ from the former Chancellor, who has until this week been staunchly refusing to cut taxes to help families struggling with higher food, fuel and energy costs. Apparently ditching VAT on gas and electricity would save the average household £160 a year. Cold comfort for most people then, with an extra £3 a week to splash out.

Fairy tales and fantasy

The battle to be Britain’s next Prime Minister is raging on, with Rishi slamming Liz Truss and Liz slamming Rishi.

The money in people’s pockets has been the main focus of their slanging matches, with both Sunak and Truss insisting their polar opposite approaches to tax and helping people struggling to pay the bills will save us all from penury. Get real. Neither of them can fix the economic mess we’re in and they’re both just guessing about what’s going to happen next.

There are 160,000 paid-up members of the Tory party who will actually decide who runs the country next. Perhaps the other 46.4million people registered to vote in the UK should take solace that when things fall apart – now (Rishi) or next year (Liz) – at least they won’t have voted for it.

Don’t delay the pain

Central bank policy makers in 190 countries around the world were given a rollicking this week and told to keep putting interest rates up even if it hurts.

Governments meanwhile were told not to cut taxes although some targeted help for the poorest was allowed.

The International Monetary Fund – where the Bank of England and its international counterparts have to go cap in hand if they lose control of the domestic economy – made no bones about it: if things look bad now, they’ll be much, much worse if we don’t deal with the inflation demon today.

A further rise in household bills could be on the way (Picture: Getty)

Duty calls

Breaking news. Financial companies have been told they have to put customers ‘at the heart of everything they do’. A new rule with the snazzy name of ‘consumer duty’ announced last week means banks, insurance companies, pensions and investment providers and all other regulated finance firms have to be nicer to us.

The Financial Conduct Authority says so and it’s promising to make sure companies deliver over the next year. According to the watchdog, it will spell the end for ‘poor customer service and support’, and stop companies charging unfairly high fees. We’ll see…

Britain's Foreign Secretary Liz Truss (R) and former chancellor to the exchequer Rishi Sunak, contenders to become the country's next prime minister, take part in the BBC's 'The UK's Next Prime Minister: The Debate' in Victoria Hall in Stoke-on-Trent, central England, on July 25, 2022. (Photo by Jacob King / POOL / AFP) (Photo by JACOB KING/POOL/AFP via Getty Images) — Rishi Sunak and Liz Truss battle it out in the race to become the next PM (Picture: AFP/Getty)

Bank of England

The Bank of England’s monetary policy committee meets this week to discuss what they’re going to do about inflation. It’s supposed to be at 2%. It’s actually at 9.4%.

They can’t do anything about Russia cutting off half our gas supply, which is almost certainly going to mean October’s energy price cap will go up even further than the currently predicted £3,000 a year or more for the average household. That’s going to send inflation up yet higher and pile even more pressure on bankers to take the economic pot off the boil.

The Bank of England is expected to raise interest rates once again (Picture: Rex)

But they can raise interest rates, and it’s highly likely they will. Markets reckon they’ll announce a ‘double’ rise of 0.5%, which will take the base rate to 1.75%. It will mean mortgage rates go up, so if you need to remortgage, do it now. It will also mean savings rates go up, so maybe don’t lock cash away into long-term fixed rates which will probably prove poor value within a few months.

Saving

Some good-ish news. If you open a Virgin Money M Account you automatically get a linked savings account which pays 1.71% interest on balances up to £25,000.

It’s knocked both Chase Bank’s 1.5% account and Al Rayan Bank’s 1.6% account into touch and is now the highest interest rate available on easy access savings. Now for the ‘ish’ bit. Inflation is 9.4%, so the value of cash held in any of these accounts is, unfortunately, dropping like a stone.

More for cheese please

McDonald’s 99p cheeseburger is the latest cost of living crisis casualty. For the first time in 14 years customers will pay more than a pound for the fast food joint’s basic burger with cheese.

Deals of the Day

McDonald’s UK chief Alistair Macrow said the decision to charge £1.19 for the sandwich was one of a number of ‘tough choices’ the company had been forced to make because of rampant food and energy price inflation. McMuffins, nuggets and large coffees are also going up in price.