2,600 francs more per family: Switzerland is stuck in a cost trap

And now the rents: from October, housing costs are likely to increase for about a million households – in the order of 5 percent. This is a result of the adjustment of the reference rate announced on Thursday. And it’s just the latest in a string of bad news. If you add up the price increases for electricity that have already taken place and the announced increases in public transport prices, healthcare premiums and now also rents, there is not much left of the average budget for family holidays.

Particularly unpleasant: it is precisely these articles that make up a large part of the household budget of middle-income earners. And there are practically no alternatives: prices are set by the state or by law. There are no cheaper providers.

Extrapolated to a family with two children, this means additional costs of more than CHF 2,600 per year, as shown by the following – fictitious and highly simplified – example. It is based on calculations and forecasts of the stakeholders involved.

The Mosers live with their two children in a rented apartment, together earn about 90,000 francs a year and receive no state aid. Expenditure on health care premiums has already risen sharply this year – by an average of 6.6 percent compared to last year. Federal government experts say there should be an above-average rise in premiums this fall. If the premiums rise by 7.5 percent, that means 75 francs extra monthly costs for the Moser family, or 900 francs per year.

An average household will pay 261 CHF extra per year for electricity this year because of the increase in electricity prices for the basic supply. Then there are the mobility costs: the Moser family has no car and travels by bus and train. She currently pays more than 7,000 francs for the family’s GA travel card. Because prices for public transport will also increase by an average of 4.3 percent as of December 10, 2023, the Moser family expects additional costs of 300 francs.

The largest item in the household budget is still missing: the increase in the reference interest rate and inflation enable the landlord to increase the rent of the Moser family by five percent from the previous CHF 2,000. Means: 100 francs more per month.

All in all, this means about 2,700 francs extra costs every year – just in the areas of housing, mobility and health. In fact, depending on consumption, there are additional inflation-related costs. It is true that these are partly offset by the wage cost adjustment. But in most areas, this can’t keep up with actual inflation. The result is a real loss of purchasing power.

What is striking is that in recent years not only prices for classic consumer goods have risen sharply, but also the so-called administered or semi-administrated prices. These are the prices set or approved by the public sector. According to the national consumer price index, this includes expenditure on insurance, energy, public transport and education. Since December 2020, costs in this area have increased by 3.9 percent.

This is where the price monitor comes into play. Stefan Meierhans identifies those areas in which competition is not or insufficiently active. He monitors prices “set by companies with significant market power or the state”. When asked, he confirms that the price increases are “particularly painful for lower-income households, but also for the middle class”.

That is why he has repeatedly asked politicians and listed companies to “exercise particular restraint in the current period of unexpectedly rapid inflation”. For example, he suggested using previously accumulated reserves to reduce price premiums or financing parts of the offerings that are in the public interest through taxes rather than fees.

But he was not always able to implement his recommendations on a political level. Interest rates on high-voltage lines are still too high. Action is also called for in the area of ​​medicine prices and hospital rates.

According to the Consumer Protection Foundation, the situation for consumers is becoming “increasingly unsustainable”. Rising prices would become a serious problem for many households. That is why the foundation has been sending out a newsletter with concrete saving tips for several months now. There, for example, it is advisable not to pay in installments or to have things repaired instead of buying new ones.

Consumer protection locates the causes of the increase in costs in the current world situation with rising interest rates and rising energy prices. On the other hand, politics also play a role: “Care premiums are rising, partly because parliament stands in the way of effective austerity measures.” And the increase in public transport ticket prices is largely due to the reduction in federal contributions to regional transport – i.e. to the savings targets set by Finance Minister Karin Keller-Sutter.

The foundation advocates expanding premium discounts, strengthening the role of the price monitor and abolishing the basic fixed amount for electricity. However, politicians “have so far not shown a willingness to relieve consumers”.

It is unlikely that it will stay that way. Because the biggest cost shock will hit the population in September, when the sharp increase in health care premiums for next year is officially announced. And many tenants will therefore have to adjust their standing order with the bank upwards, since the announced rent increase will take effect from 1 October in many places.

Both almost coincide with the week in which the documents for the October 22 elections were sent. “At the latest this year, the subject of loss of purchasing power has become a trend topic. Autumn is the perfect time to mobilize voters on this subject,” says Lukas Golder of the opinion research institute GFS Bern: the inflation problem has everything it takes to get people to the polls in the short term. “These are developments that are immediately noticeable in the wallet – and at the same time the election brochures are on the kitchen table,” says Golder.

But who benefits? In the left-wing camp, the SP could play into the hands, which has been campaigning against purchasing power together with the unions for some time, says Golder. This should be at the expense of the Greens. He sees the SVP as having an advantage over the middle class: the sympathizers of the FDP are more affluent and less price sensitive. Experience shows that people who rarely participate in elections are more strongly addressed by the SVP, who must score points with, for example, her campaign against immigration in the rental sector. (aargauerzeitung.ch)