IFS: Older and poorer households facing higher inflation

12 March 2009

Pensioners and poorer people are facing much higher inflation than the average UK resident, the Institute for Fiscal Studies (IFS) reports.

This is largely down to the fact that the prices of different goods and services rise or fall at very different rates.

Older and poorer households, the IFS states, are suffering most from rises in the cost of food and domestic energy, while younger and richer households are benefiting most from reductions in their mortgage payments and the cost of motoring.

The IFS site contains a presentation which points out that official measures are only meant to be averages. The `inflation rate` would only apply to everyone if everyone had the same spending patterns - or if all items had the same inflation rate.

This clearly isn`t the case. In January 2009, statistics from the National Office for Statistics (ONS) show that the official RPI (Retail Prices Index) rate of inflation may have been 0.1%, but some items were far above and others below this rate.

The cost of private transport, for example, had dropped by 9.1% over the past 12 months, but the cost of household fuel had risen by a full 35.1%.

"People who spend more of their income, as a percentage, on things like their heating bills are actually facing much higher levels of inflation than the rest of the population," said a debt expert for Think Money.

"Clearly, this means some groups are much more likely to get into financial difficulties, or even debt. If people find they can`t keep up with the rising cost of living, it`s important they seek debt advice as soon as possible."

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Tags: spending, cost of living, debt, pension, pensioners, Institute for Fiscal Studies, prices, debt

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