Angela Monaghan 

Britain’s poorest households face higher rates of inflation, research suggests

Report shows households with least disposable income exposed more to changes in food, fuel and energy prices than wealthier groups
  
  

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The ONS study found that prices have risen by 39% for the bottom 10% over the past decade. Photograph: Andy Weekes/Rex Features Photograph: Andy Weekes / Rex Features

Britain’s poorest households have suffered higher rates of inflation over the past decade than wealthier households, official research suggests.

The bottom 10% of the country in terms of spending faced an average annual price increase of 3.7% since 2003, according to the Office for National Statistics, compared with just 2.3% for the top 10%.

By comparison, the consumer price index – the official measure of inflation designed to capture price movement for households overall – has risen by 2.6% each year on average.

The ONS said much of the discrepancy was explained by the greater exposure of lower-spending households to changes in the price of food, fuel and energy.

“The degree of variation in the price experience of different households is relatively broad,” the ONS said. “Some sub-groups of the UK population have faced relatively strong headwinds in recent years, eroding both their real incomes and their capacity to spend.”

The trend was reflected in lower-income groups, where the bottom 10% of households measured by disposable income faced average inflation of 2.9% between 2003 and 2013. Those around two-thirds of the way up the income distribution table experienced price growth of just 2.4% over the same period.

Over the decade as a whole, prices have risen by 39% for the bottom 10% in terms of income, compared with 31% for those two-thirds of the way up in the seventh income decile.

Retired households and those without children have also faced faster price increases than non-retired households and those with children, the ONS said. Retired households are particularly exposed to energy and food price changes, but less affected by higher university tuition fees and package holiday prices.

People with mortgages have also fared better, because of lower mortgage interest payments.

“Comparing high- and low-expenditure groups, changes in the costs of utilities, food and drink account for most of the differences in inflation rates,” the ONS said.

UK inflation has been falling in recent months. ONS figures published on Tuesday are expected to show that annual inflation slowed to 1.2% in November, from 1.3% in October, dragged down by lower petrol prices.

The Bank of England said in its November inflation report that inflation is likely to fall below 1% in early 2015. Falling commodity prices and weak wage growth against a backdrop of sluggish global growth triggered a sharp downgrade in the Bank’s forecasts for inflation, which is now expected to take three years to return to the 2% target.

 

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