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Tuesday, 14th June 2011

UK: The spending patterns and inflation experience of low-income households over the past decade

Source: Institute for Fiscal Studies (UK)

From the Executive Summary:

This Commentary analyses recent trends in household spending, with a focus on domestic fuel and water, and examines the impact of changes in the price of these goods on household inflation, particularly for those on low incomes and those for whom state benefits make up the largest component of their income (‘benefit-dependent’ households).

• There are clear differences in spending patterns between high- and low-income households. Low-income households tend to devote a greater share of their spending to fuel and water than higher-income households. In 2009, the poorest 10% of households by income (i.e. the lowest ‘income decile’) spent 7.7% of their budget on domestic fuel compared with 3.4% for the highest income decile.

• In recent years, inflation rates have been particularly high for goods that make up a larger share of the budget of low-income households. In particular, domestic fuel prices rose very rapidly during 2006 and again in 2008: fuel price inflation reached a peak of almost 40% in September 2008.

We find that, on average, lower-income households had higher inflation rates over the last decade than higher-income households.

• In particular, the second-to-lowest income decile of the population experienced the highest average inflation rate of the period from 2000 to 2010, with a rate of 3.5%. This contrasts with the highest income decile, who experienced the lowest inflation, with a rate of 2.9%.

• However, no single group consistently experienced a higher average inflation rate than others in every year over the period we consider.

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Having begun his career in academic libraries, Adrian Janes has subsequently worked extensively in public libraries, chiefly in enquiry work as an Information Services librarian. In this role he has had particular responsibility for information from both the UK Government and the European Union. He wrote a detailed report on sources for the latter which was published by FreePint in 2007, and has contributed articles to FreePint and ResourceShelf. He is involved in training in information literacy and the use of online reference resources.

A Contributing Editor to DocuTicker, he also write reviews for Pennyblackmusic.

More articles by Adrian Janes »



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