Energy News

Soaring energy bills burden poor with higher inflation

Wednesday 15 June, 2011

By Martin Fagan - news@consumerchoices.co.uk

Rising energy bills mean UK’s poorest hit harder by inflation than the rich, says IFS.

Poorer households have experienced higher average inflation rises than richer counterparts over the past decade, according to new research by the Institute for Fiscal Studies (IFS).

This difference has been especially marked since the recession where, between 2008 and 2010, the poorest fifth of households faced an average annual inflation rate of 4.3%. This compared to a rate of just 2.7% a year over the same period experienced by the richest fifth.

Research by the think tank was funded by energy watchdog, Consumer Focus, found that the doubling of energy prices over the past decade had disproportionately hurt poor households.

On average they spend twice as much of their income on food and fuel than more well-off households, said the study.

According to the IFS research, during the period of the recession, dramatic cuts to interest rates reduced mortgage payments, which tend to be more important for richer households.

At the same time, the prices of gas, electricity and food increased and this hit poorer households harder.

Pensioners - and especially those dependant on state benefits - have been particularly hard hit.

“The research shows low-income households spend more than twice as much of their budget on energy when compared to the highest income groups,” said William Baker, fuel poverty expert at Consumer Focus.

“This means they live in colder houses, face unmanageable levels of debt and may even be forced to make budgeting decisions as stark as whether to heat or eat. Inflation rates for fuel are already higher than for other goods, and double digit price increases will push millions more on low incomes into fuel poverty.”