Seven hidden costs driving prices up

Even when you're on the look-out for extra charges, there are seven hidden costs you may miss

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We've wised up to extra charges nowadays. We know that insurers will offer us the option to pay monthly - and then usually add on interest; we're aware that when we fly with a budget airline the headline price assumes we're not taking any luggage; and we know that concert tickets always come with an inexplicable 'administration fee'. However, while we work to avoid the extra charges we can see, behind the scenes there are a host of other costs that go undetected.

These are levies and charges added by companies and included in the full price, so we never know that we're paying for things we don't really want. We reveal seven charges you may not be aware you're facing.

1. Green levies on utilities

These became more widely publicised last year when the government agreed to offer customers a rebate and review whether the levies were really offering value for money. Before the rebate, typically we were paying £25 a year extra on our gas bill to fund the installation of insulation for families on low incomes, plus £6 for the warm home discount and £2 for smart meters.

On our electricity bill we were paying an average of £22 for subsidising insulation, £30 to fund the search for renewable energy sources, £8 for a European carbon trading scheme, £5 on an EU tax on fossil fuels, £6 for the warm home discount, £7 for Feed in Tariffs, and £1 for smart billing. The total comes to £112 a year - or almost 10% of your energy bill.

2. Airport tax

There was much celebration in the Budget in March 2014, when George Osborne reduced the level of Air Passenger Duty on long-haul flights. However, this doesn't kick in until April 2015, and until then the UK will still have the second highest departure tax in the world - and be one of only five European countries charging this tax.

At the moment flights under 2,000 miles face a tax of £52 per ticket, while those over 2,000 miles are charged at between £276 and £388 depending on how far they are. From April next year the long-haul flights will all be in a single price bracket costing £284. Despite the celebration, it still means that a quarter of your flight price can easily be made up of tax.

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3. Insurance fraud

Many people think of insurance fraud as a victimless crime - which is why a shocking number of people admit they would try to bump up a claim. However, there are some real victims of this crime: other people who buy insurance. The total cost of undetected insurance fraud is estimated at £2.1 billion a year - adding an average of £50 to the annual premium for every single policyholder.

4. Supermarket schemes

Rewards schemes from your supermarket seem like money for nothing. At this time of year many people swap their vouchers for double the value in certain departments, or get up to four times the value by spending them at various places that accept the vouchers. It gives them a great feeling of getting a bargain.

However, these aren't freebies: you're paying for them. The cost of the scheme is paid for by fractionally increasing the price of everything you buy. Armed with this knowledge you can try to get maximum value from the scheme. However, if you don't make every effort to take advantage of the rewards, then you're paying handsomely for something that you get little value from.


5. Pensions for council staff

According to the Centre for Policy Studies, £1 in every £4 you pay in council tax is ploughed straight into paying the pensions of retired local government staff. That's a total of £5.7 billion last year. In Scotland the situation is even more extreme - because almost half of council tax revenue is spent on these pensions.

6. Fuel levy

We all know that a proportion of what we pay for petrol goes to the government, but the size of this hidden cost may come as something of a surprise: around 60p in every £1 you spend at the petrol station is tax. UHY Hacker Young says that this means the UK has the highest fuel taxes in the world.

7. Alcohol tax

Cutting one or more elements of alcohol tax has been George Osborne's favourite way to bring a bit of cheer to his Budgets. However, while 1p off the price of a pint of beer is technically a tax cut, the duty on alcohol remains impressively hefty.

The tax on a bottle of wine is £2.05, on fortified wine it's £2.73 per 75cl, on spirits it's £3.41 per 70cl, and on beer it's 43p per pint. You also need to take into account that there's tax when alcohol is imported too, and then VAT on top. It's no wonder that the value of the wine in the bottles most commonly bought in British supermarkets is a matter of pennies.

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