Inflation hits the poor and pensioners
INFLATION is harming the UK’s poor and pensioners more severely than people on higher incomes, research from the Institute for Fiscal Studies (IFS) revealed today.
The figures compound worries about further hikes in household energy prices, which will see those on lower incomes holding back on heating their homes, the report warned.
Domestic fuel costs use up nearly a tenth of the budgets of the poorest fifth of Brits, compared to just 4.4 per cent of budgets for the wealthiest fifth, the IFS said.
“During the period of the recession, dramatic cuts to interest rates reduced mortgage payments, which tend to be more important for richer households,” the IFS said.
“At the same time, the prices of gas, electricity and food increased and this hit poorer households harder on average.”
Overall inflation measured 4.3 per cent between 2008 and 2010 for the poorest fifth, compared to just 2.7 per cent for the richest fifth.
Wealthier people spend a lower proportion of their income on food and energy, two of the primary drivers of inflation.
The wealthy spend a larger chunk of their cash on leisure goods, the research found. Goods in this category actually fell in price over the previous decade (2000-2010), by 23.8 per cent.
Over the same period, domestic fuel costs rocketed, by 117.9 per cent, while food prices were up 41.1 per cent.
“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,” commented IFS economist Peter Levell.
Yearly inflation for benefit-dependent pensioners measured 4.6 per cent from 2008-2010, compared to just 2.9 per cent for working age people not dependent on state benefits.
Even pensioners with independent finances experienced 4.3 per cent inflation, compared to four per cent for working age benefit recipients.