Price increases for those with the least disposable income have increased 24% faster than those with the most.
From June 2021 to June 2022, the inflation the percentage for the richest fifth in the country was 7.9%, while it was 9.8% for the poorest fifth.
That means prices are rising faster, by nearly a quarter, for those who already have the least money to spend, Sky News analysis of new ONS figures shows.
Today’s figures are the first official inflation measures by income group since the fuel price hike came into effect in April.
With the October price cap announced next week, things could get even worse.
Energy prices are expected to nearly double again to £3,582 a year, and the Institute for Fiscal Studies says the poorest 20% will be hit much harder than the richest if that happens.
Why is there a difference?
Those with the least disposable income spend more on essentials, such as energy, as part of their total expenses, compared to those with more disposable income who can spend more of their money on luxuries.
“Energy really made the difference between rich and poor,” said Peter Levell, associate director of the Institute for Fiscal Studies.
“At the beginning of this year there were not really big differences [between income groups]but that really changed in april [when the energy price cap went up].”
A low-income single adult will spend on average £1 of every £3 they earn on energy, while a middle-income person in the same situation will spend about £1 for every £20, according to social change research group The Joseph Rowntree. Foundation .
These maps show the most common problem that the Citizens Advice Bureau has helped people with in each municipal area, in the year to June 2019 and the year to June 2022.
Rent is still a big problem in parts of London and the South East, but in the vast majority of the country it’s clear that fuel cost concerns have overtaken all others.
What can the government do to help?
The Citizens Advice Bureau (CAB) says it already sees a positive effect from the government-announced aid payments earlier in the year.
Those eligible received £150 off their council tax in April, while all energy consumers received £200 in bills in October.
Tom MacInnes, CAB Chief Analyst, said: “Over the past month we have fallen short of our projection [on how many people are referred to food banks]. We think there is solid evidence that the cost of living has had an effect.”
“The question for us,” she added, “is whether those payments have changed the trajectory so that we end up a lot lower at the end of the year? Or has it just pushed it down a bit for a few months.” Then we’re not much lower than we expected.”
Benefit recipients are even further behind
The amount of money claimants receive from Universal Credit is linked to inflation. As wages struggle to keep up with inflationthis should mean that benefit recipients are more resistant to price increases than employees.
However, payments only change once a year, in April, and the inflation rate they’re linked to is from months before that.
In April this year, payments rose by 3.1% – the same as inflation from September 2021. Inflation was already 9% in April, three times that increase in payments.
“The same thing will happen again this year, as the major energy price hikes will happen in October, after the September inflation figure comes out,” explains Mr. Levell.
This chart shows how Universal Credit applicants can face a real discount of more than 10% by Christmas.
What measures will be taken next will ultimately be a decision for Rishi Sunak or Liz Truss, when the battle to become the next prime minister ends on September 5.
Mr Sunak has pledged more immediate aid, while Ms Truss says her primary focus is on tax cuts and that she will “see in the fall what the situation is” in terms of energy.
Mr Levell says: “It makes sense for the government to step in and try to help protect people. If they want to make it cheaper, they’ll have to direct those cash payments to those who need it most.
“But we need a way to strike a balance between protecting the people who need help, but also ensuring that people have an incentive to reduce their fuel consumption, because there is a mismatch between supply and demand. “
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