Poorest ‘face almost 11% inflation’ as energy bills fuel cost-of-living squeeze

Official statistics showed Consumer Prices Index inflation hit a 40-year high of 9% in April, but analysis by economic think tanks showed the squeeze on budgets faced by the poor was even greater.

Institute for Fiscal Studies (IFS) analysis indicated the bottom 10% of the population in terms of income faced an inflation rate of 10.9%, while for the richest 10% it was 7.9%, a full three percentage points lower.

The Resolution Foundation (RF), which focuses on living standards, estimated that the poorest households faced a rate of 10.2%.

The difference is largely due to soaring energy bills, with the price cap increasing by £693 for the typical family in April.

For the poorest households, energy costs make up a greater proportion of expenditure than for wealthier counterparts.

The IFS said the poorest households spend 11% of their total household budget on gas and electricity, compared to 4% for the richest households.

The rising cost of food is also a factor, with prices rising by 6.7%, their highest rate since 2011.

Heidi Karjalainen, a research economist at the IFS, said: “Inflation hit 9% in April.

“Because so much of the increase was driven by the increase in the gas and electricity tariff cap, poorer households who spend more of their budgets on gas and electricity, faced an even higher rate of inflation.

“We estimate that the poorest 10% of households faced an inflation rate of 10.9%. State benefits only increased by 3.1% in April. This means big real terms cuts to the living standards of many of the poorest households.

“Continuing pressures, such as the war in Ukraine, are likely to push Ofgem’s October tariff cap, as well as other prices including food prices, even higher later this year.

“We are likely to be in a prolonged period during which poorer households are facing rates of inflation even higher than the headline figures would suggest.”

The RF said the figures showed the need for the poorest households to be given targeted support by the Government, potentially through an increase in Universal Credit or a sharp rise in the Warm Home Discount scheme, which helps with energy bills.

Jack Leslie, senior economist at the RF, said: “Inflation reached a 40-year high last month off the back of a sharp rise in energy bills and the highest food price inflation in a decade. These recent drivers of inflation mean that lower-income families are facing the most severe cost pressures, with their inflation rate already hitting double digits.

“Inflationary pressures are likely to continue to grow through the year as the effects of higher energy prices continue to work their way through businesses and into consumers’ pockets.

“Nobody knows how long these pressures will last, or how workers will respond via higher wage demands, which is why the Bank faces a tough judgment on the pace and scale of interest rate rises.

“But one thing is certain – the Government must provide further targeted support for those lower income families at the sharp end of this crisis.”