The rising costs of living hit poorer households harder

Low-income households experience higher inflation than richer households; in April the annual rate for the poorest 10% of households was estimated at 10.9%, compared to 7.9% for the richest 10%. This is because they spend a higher proportion of their household budgets on essentials and so are more affected by increases. The campaigner Jack Monroe has argued that the reality is even worse because the price of cheaper food items has increased more than others, or they are no longer available. Poorer households also have fewer ways to cope with the rising costs of essentials, whereas richer households can, for example, cut back on savings or holidays. According to the Office for National Statistics, 24 million people reduced their energy use between March and June 2022, and 16 million cut back on food and essentials, to cope with the rising cost of living.

The poverty premium is the extra costs that people on low incomes and in poverty pay for essential products and services. Examples including having to use pre-payment meters for gas and electricity, paying higher premiums for home and car insurance because of living in poorer areas, and having to use high interest loans and credit cards because of not qualifying for cheaper forms of finance. One in eight households pay at least one type of poverty premium, and the average low-income household pays an extra £430 per year compared to other households due to the effects of the poverty premium.

Childcare represents 7% of household income among families paying for it, but for the poorest 20% of families, it represents 17% of household income. Among this group, one in three families using childcare are spending more than 20% of their income on childcare (which means they are defined as being in childcare poverty). Many families are unable to afford childcare at all, which often means that family incomes are reduced from being unable to work as many hours, which affects women in particular.