Diminishing discretionary income #financefriday

Inflation is soaring in the UK and energy bills are forecast to reach levels that for many people are simply unaffordable. Boris, our porcine Prime Minister, has been very quiet and the contenders to replace him talk of tax cuts! We really can’t afford to give the rich tax cuts, in fact, taxes need to be increased.

Natural gas

Roughly half our natural gas is imported. When Boris said we were 97% self-sufficient it was another porkie. The reality is we could see rationing next winter. Prices will be very high so we can’t ration by increasing the price and cutting gas off for 4-hour periods isn’t likely to work either. Helping the poor to afford gas and expecting the better off to reduce consumption seems to be the logical choice. If OFGEM changed the price cap so we had no standing change and a slightly higher unit price, that would help to ration it too.

Electricity

Why is electricity so expensive? That needs to be looked into. We make some from expensive gas but much of our electricity comes from nuclear and wind farms. I suspect some producers are making excessive profits.

The Green levy and VAT

Do we need a green levy now? People are already trying to cut down on consumption. Those who are well off however can afford both the energy and the levy and VAT. Maybe we can leave those alone and simply help the poorer households. Those on 100K a year can cancel their next step up on the housing ladder and think about insulating their homes further and maybe getting some solar panels.

This week

This week the stock market has seen further recovery and even the US markets are looking more positive. Those firms that export or make their money in USD have seen higher share prices. While the pound is low against the USD I favour the British oil majors and big pharmaceuticals. They are particularly good for US investors too.

Discretionary income

My discretionary income is being cut by inflation and the money in my bank account is being devalued. That is the price we pay for all that quantitative easing. QE may seem like easy money for the government that they can waste but it devalues the GBP. I can’t understand why the GBP is devalued against the USD so much when the US also used QE. The pound now hovers around $1.22 making imports so much more expensive. Having a few investments does increase my discretionary income. Next month I have dividends from Barclays, Lloyds, Shell, BP and Standard Chartered. Those share prices are increasing too as some of those companies do share buybacks. Discretionary income is the income we have after paying for all the essentials. It is the income we use for enjoyment. If we can improve our discretionary income or maintain our discretionary income with investments we have a better standard of living.

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