Living costs rising faster for UK's poorest families than richest

Living costs have increased faster for Britain’s poorest households than for the richest, according to official figures, amid a squeeze on living standards for low-income families that has lasted more than a decade.

The Office for National Statistics said costs for the poorest tenth of households in Britain had risen by 2.7% a year on average between 2006 and 2018, compared with an increase of 2.3% for the richest tenth.

For all households, living costs increased by about 2.4% a year on average over the same period.

The assessment of the way households experience price increases based on the goods and services they consume formed part of the ONS’s experimental household costs indices. Based on a range of goods and services including education, housing, transport, food and clothing, the barometer provides a wider examination of living costs in Britain than the consumer price index (CPI).

The ONS said that differences in the share of household income spent on different types of goods and services was responsible for the faster growth in living costs for poorer households.

Low-income households spend proportionally more on food and drink, where prices have risen faster than other categories since 2005.

High-income households have seen slower growth as mortgage interest payments have fallen since 2009, when interest rates were slashed close to zero by the Bank of England to fight the last recession. Richer households are more likely to own their own home than the poorest families, who are more likely to live in rented accommodation.

The rise in living costs felt by rich and poor is thrown into sharper relief over a longer period. Cumulatively since 2005, the costs facing low-income households have risen by 41%, while costs for high-income households have risen by 35%, according to the ONS.

The assessment comes as households across the country have faced a squeeze on incomes in the decade since the financial crisis – from weak growth in pay and rising living costs to government austerity and benefits cuts.

Charities say there is often a “poverty premium” for lower-income families, particularly for financial services. While richer families benefit from lower-interest payments on credit cards, poorer households typically pay more to borrow money.

Research from Pockit, a digital current account provider, earlier this week showed that Britons without a bank account pay up to £485 extra each year for bills and basic services.

Carl Packman, the head of corporate engagement at the Fair by Design campaign, run by the Barrow Cadbury Trust, said: “Living in poverty there are no guarantees, except for the fact that it’s so very expensive. The cost of living, even for the basics, can come at a much higher price, ironically, than if you are comfortable or financially better off.”