Yahoo Finance Cost of living: Lowest income households spend third of budget on food as inflation bites
Brits in the lowest income bracket are struggling with the rising cost of living, spending a third of their budgets on food and household bills, while the richest spend only a fifth of their money on these items, new data has shown.
According to the latest experimental figures from the Office for National Statistics (ONS), those in low-income households are seeing a cost of living squeeze driven by rent, utility bills and food.
On the other hand, high-income households’ experience of inflation is most affected by rising transport costs, on which they spend a larger proportion of the expenditure in comparison.
Other driving forces included spending on restaurants, accommodation, recreation and culture.
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However, both high-income and low-income families have experienced similar overall annual inflation rates since 2014.
It estimates that low-income households in December experienced annual consumer price inflation of 5.3%, while high-income households saw inflation of 5.5%.
In addition to this, retired and non-retired households have experienced similar levels of inflation rates since April 2021.
The ONS data comes after a well-publicised campaign by Jack Monroe, who took aim at the use of the consumer price index, saying it "grossly underestimated" the impact of inflation on poorer households. She called for an index of essential items as the cost-of-living crisis mounts.
“While the headline rates of inflation are similar for different groups, this hides important differences at a detailed level,” Mike Hardie, ONS head of inflation, said.
“It’s important to note that these experimental data are derived using the same 700 representative items used to calculate headline inflation, and including a wider range of items may show bigger differences of each group.
“Our work on the Household Costs Indices, which are designed to better measure the direct spending of households, will help shine more light on the experiences of people from different groups in society.”
Just had a brilliant meeting with the ONS - lots of interesting stuff happening to look forward to. I want a Tardis so I can go back to bullied teenage me and tell her that the flutter in her stomach she gets when doing big Maths is going to turn into Something Useful one day.
— Jack Monroe (@BootstrapCook) January 28, 2022
The ONS is still looking into broadening its inflation work to give a clearer view of how prices are rising. This will include the use of supermarket scanning data to show price moves in granular details, after warnings issued by campaigners.
Stian Westlake, chief executive of the Royal Statistical Society, said: “The Household Cost Indices (HCIs), currently being developed by the ONS and due for release in May, are designed to reflect household experience.
“They include items such as mortgage and other interest payments, student loan repayments and unlike most consumer price indices including CPI, are not skewed towards higher spending, richer households.
“Much more attention needs to be paid to and resources devoted to, their development as they can provide the long term answer to what Jack Monroe and others are rightly asking for.”
Meanwhile, Jack Leslie, senior economist at the Resolution Foundation, said: “Increasing food price inflation and the looming energy price cap rise in April will disproportionately affect families already struggling to get by. These families should be the priority for the government’s cost of living crisis response.”
Watch: What is inflation and why is it important?
