Belfast Telegraph

Tuesday 2 September 2014

No relief for big spenders as living costs remain high

Northern Ireland has the highest weekly household spend in the UK outside London and the South-East.

Homes here have to shell out £480 compared to a UK average of £460, according to the 2006-08 Household Expenditure enquiry.

Not only is spending per household higher than the UK average, this is alongside another more worrying comparison — the ratio of spending out of available income at 94%, is higher than any other region and above the UK average (85%).

Households in Northern Ireland spend at a rate higher than the UK average and reciprocally save a smaller proportion of their income.

A comparison on a per person basis changes the picture. Per person spending in Northern Ireland is an average of £181 per week, compared to a UK average of £196. Per household, Northern Ireland spends 4.3% more, but because Northern Ireland has more people in each household, per person, Northern Ireland spends 7.7% less.

Interpretation of these figures calls for care. There are no easy answers to the popular question such as: ‘is the cost of living cheaper or dearer in Northern Ireland?’ Alternatively, caution is needed on questions of the affordability of lifestyles. Do people in Northern Ireland spend more on an item because it is more expensive or because more is consumed?

Less is spent on housing mortgage repayments because average house prices are lower, not because people chose to live in cheaper (or smaller) houses. More is spent on meals away from home, yet it might be thought that restaurant prices (on average) would be below a UK average. This points to a lifestyle difference.

Making a subjective assessment, the differences do not suggest that the cost of living in Northern Ireland, for a given standard of living, is likely to be higher than the UK average. The groups of items where spending is higher or lower point to lower costs for comparable housing and water services, which more than offset higher electricity and fuel costs along with higher vehicle insurance charges.

Whether because prices are higher, needs are greater, or lifestyles are different, there is a wide range of sections of the household budget where spending per household is significantly higher.

Of the groups of items where spending is higher than the UK average, local lifestyles are thought to contribute to the greater spending on clothing and footwear, |tobacco, personal care and eating out. These differences have been found in successive enquiries. Why spending on clothing is |57% higher per family can only |be partly explained by larger |family size. There does seem to |be an unquantifiable lifestyle |explanation.

Family food and beverages spending shows a significant set of local differences. The weekly household bills are 14% higher than the UK average. About half of this is explained by the larger family size. However, the survey may suggest a continuation of a trend for food prices to be higher, rather than suggesting that we eat more! However, there are spending groups where Northern Ireland households are at an advantage (and pay less).

There is no surprise that water and sewerage costs are dramatically different, since water charges are not yet the norm here and the other advantages reflect the continuing lower costs of renting or buying houses.

Perhaps more surprising is the extent to which households spend less on package holidays: this suggests that more people do not take this type of holiday. That spending difference may be an indication that household budgets here do face constraints consistent with the lower average income and the squeeze on saving in the household budget.

For the policymakers in |the Northern Ireland administration there can be contradictory conclusions.

Is it to the credit of local decision makers that the two areas where the Government has largest direct impact on household costs (water and rents) combine to give local households a £15 per week advantage? Alternatively, does this point to policy questions based on parity of treatment?

Water charges are looming already: is there also a need to think about policy on housing rents?

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