Rising energy prices combined with housing payments has meant that the majority of working class households are now spending the a large portion of their salary on housing costs, the Office for National Statistics has disclosed.
Compare gas and electricity prices with Propertywide.
According to the ONS, housing costs now comprise the largest part of household outgoings, overtaking transport, and is the clearest evidence yet that household incomes are being ‘squeezed’ to the limit.
They have also argued that a consistent decrease in the disposable income available to people has led to them having far less to spend on themselves in the past year. Last year, the average household had £489 of disposable income to spend whilst back in 2006; this was a far higher £526.40.
Shadow energy and climate secretary, Caroline Flint, says the data clearly highlights the endemic poverty problems ingrained within the UK at the moment, and reinforced Labour claims that household squeezes had led to a ‘broken link’ between economic growth, living standards and actual wages.
Speaking earlier this week, Mrs Flint said: “Higher energy bills are one of the main reasons people are finding it harder and harder to make ends meet.”
The ONS disclosed their belief that the particularly cold winters of the past two years have been the primary reasons for persistent price hikes in recent times, and has warned that rising energy prices has already led to families being forced to reduce their vehicle usage and food spending.
Low earners are currently being forced to contribute a quarter of their salary on housing costs, which compares to only 9% for top bracket earners.
And this has meant that low salary households have been forced to reduce their weekly food budget by at least £1 a week, reinforcing Labour criticisms that poor homes would be faced with the decision between food and fuel this winter.
The ONS also highlighted that rising transport costs had also contributed towards the current ‘squeeze’ being experienced by low-income homes, arguing that: “The price of petrol increased substantially over this period, and it’s likely that motorists have responded to this by reducing journeys,” it said.
Leading retailers in the UK have cited that lower levels of disposable income within British households was reducing their sales numbers, with Asda head, Stephen Smith, pessimistically predicting that the effects of rising energy bills will reflect on consumer spending in the next few weeks.
Mr Smith identified that an internal study had suggested that consumers were set to spend between 2% and 6% less on Christmas this year, with a greater number of people searching for discount products and special offers due to their lower levels of disposable income.
“Things are improving and there is no doubt that the business environment is getting better but that is just not translating to disposable income for the masses,” he said.
Following recent announcements about the country’s economic growth, a wave of optimism has been expressed by a number of individuals who believed the worse had past.
However, data from opinion organisation YouGov has suggested that this has already diminished; with more households questioning the impact growth was having on living standard improvements.
Stephan Shakespeare, a YouGov spokesman, said: “The picture they painted of their own finances was far removed from the burgeoning economic recovery they’ve read about in the newspapers.
“Participants all said they had cut down to near bare essentials and were feeling particular pressure being on such a tight budget for Christmas.”
“Our research shows that following a year of economic growth, Britons are still three times more likely to save a cash windfall than spend it,” said Shakespeare.