Andy Bruce

LONDON, (Reuters) – Inflation is rising in Britain, according to official data. However, low-income families are less likely to be spared by the rise in food and energy costs.

The annual increase in consumer prices by 5.4% was last month. It is the highest in 30 years, making inflation an important political issue. Campaigners claim that the most recent figure does not reflect the real cost rises faced by the lowest income families.

According to new data from the Office for National Statistics, both low and high income households experience similar inflation. The analysis does not account for changes in consumer behavior during the pandemics or for differences in quality food purchased.

According to the ONS in December 2018, low-income households suffered from an annual inflation rate of 5.3%, while those with high incomes faced inflation of 5.5%. These data show that the difference between them has not been made since 2014.

GRAPHIC UK inflation by income

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Analysts warn that inflation could rise for the poorer Britons this year, even if it is lower than their wealthier peers.

Jack Leslie (an economist with the Resolution Foundation think-tank) stated that while the ONS statistics confirm that inflation rates for different income levels are similar, it also highlights how families of low income experience inflation differently.

Given that they are twice as likely to spend on food or domestic expenses as their income, he said higher food prices and the potential of Britain raising its household energy price limit in April could hurt low-income families the most.

Leslie said that “these families should be prioritized for the government’s cost of living crisis response.”

The think tank calculated that it would take at least 2.5 billion pounds to reduce the effect of April’s increased energy bills for poorer families ($3.4 billion).

EXPENSIVE ESSENTIALS

A Reuters analysis suggests that low-income households are less able adapt to price increases due to their inability to spend on essentials such as food and shelter.

The ONS reported that December’s slightly higher inflation rates for the well-off were due to increased transport spending.

Inflation has been driven by the surging prices of petrol, new and used vehicles, which account for a greater proportion of household spending than high-income households.

Inflation has also been driven by high-income households through restaurant meals.

The inflation data for last week indicated that while better-off households may be able to spend less at restaurants and put off replacing their car during times of high cost, they are more likely to have higher basic food and shelter prices.

The largest increase in food prices for the past nine years was 1.4%, which is also the highest since January. Month-on-month, the prices of meats, vegetables, bread and cereals all rose by over 2%.

In December 2016, the actual rents, where the spending tends to be more towards those with lower incomes than the average household, rose by 2% annually. This is the largest increase since 2016.

After adjusting for household size, the ONS defines a household with a high income as having after-tax income which is at the top 20%, but not top 10%. A low-income household, on the other hand, would have an income of the lowest 20%, but not top 10%.

Recently, Jack Monroe, a social activist and writer has drawn media attention to the ONS’s method of measuring food prices.

She argues that the ONS is unable to accurately capture the price of a particular item, such as a canister of baked beans. This causes big price swings in the lowest tins, which tend to get bought most by the poorest.

However, the ONS admits to its limitations in measuring consumer prices. The ONS uses 700 different goods and services from various suppliers. 180,000 price information are provided each month.

It intends to make use of prices from supermarket checkouts. The result is a higher number of price data points, reaching hundreds of millions.

Friday’s numbers also show spending patterns in 2019, prior to the pandemic. The ONS will rectify this in May with new data.

($1 = 0.7457 pounds)