Belfast Telegraph

Home News UK

Poor 'hit hardest by recession'

Poor families have seen their day-to-day living costs rise 50% faster than richer households since the recession struck, according to new research.

The poorest fifth of households have seen the cost of the goods and services they use rise by 4.3% a year between 2008 and 2010, significantly above the 2.7% annual rate of inflation experienced by the richest fifth of households during the same period, according to the Institute for Fiscal Studies.

Pensioners and people who are dependent on state benefits have been hit particularly hard by rises to the cost of living, as they spend proportionately more of their income on food and fuel, while they are less likely to have benefited from low interest rates.

The average pensioner who is dependent on benefits has seen inflation increase by 4.6% a year between 2008 and 2010, while a non-benefit-dependent pensioner has seen a 4.3% annual rate of inflation.

People of working age who are dependent on benefits have seen the cost of the goods and services they use rise by about 4% a year during the same period, significantly higher than the annual rises of 2.9% faced by people of working age who do not rely on benefits.

The research, which was funded by consumer group Consumer Focus, found that poorer households had been hit particularly hard by energy price rises, with domestic energy costs doubling between 2000 and 2010. The poorest fifth of households spend about 9.4% of their budget on energy, compared with just 4.4% for the richest 20% of households.

Food price hikes of 41% during the past decade have also hit poorest families hardest, as they spend a fifth of their budget on food, nearly double the 10.1% that richer households spend.

But at the other end of the scale, only 1.7% of a poorer household's budget is spent on mortgage interest, compared with 8.7% for richer households, meaning they have benefited less from the sharp fall in interest rates. Richer households also spend proportionately more of their income on leisure goods, which have seen lower price rises.

Research economist Peter Levell said: "Over the past few years relative price changes have tended to hit poorer and older households harder. Of course this pattern may well change in the future, but it does mean that poorer households will have fared worse over the period of the recession than poverty and inequality statistics that don't account for these differential inflation rates would suggest."

Popular

From Belfast Telegraph