High Inflation Hits Poorer Households

Published on 1 January 1970 by Raffick Marday

Poorer households have experienced higher inflation than richer ones over the past decade, new research shows.

According to the study conducted by the Institute for Fiscal Studies, funded by Consumer Focus, the difference between how poor and rich households feel the effects of inflation has been especially marked since 2008 – the beginning of the recession.

The average annual inflation rate experienced by the poorest fifth of households in the country is 4.3 percent between 2008 and 2010 when the recession hit. In contrast, a rate of 2.7 percent was experienced by the richest fifth over the same period.

In particular it has been shown pensioners dependent on state benefits have been particularly hard hit, experiencing higher rates of inflation than those not on a pension.

High inflation is in part due to the cost of domestic energy prices which have more than doubled between 2000 and 2010, and poorer households have been shown to spend on average twice as much on energy, as a share of their expenditure, as richer households.

Fuel prices have also placed pressure on finances and contributed to rising inflation. In 2008, the RPI rose by 4.0 percent and at the same time fuel prices rose by 18.9 percent, adding 1.8 percentage points to the average inflation rate experienced by the poorest 20 percent of households. This was only 0.8 percentage points to the rate experienced by the richest 20 percent in that year.

Budget with a Prepaid Credit Card

If you are feeling the pressures of fuel prices and energy costs on your budget then you may find a prepaid credit card could help you stay out of your overdraft.

It is sometimes easy to overspend, especially if you are used to your income affording a certain lifestyle, and then an increase in prices suddenly means you have to be a bit more careful.

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