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17 June 2022

Inflation will be far higher for the poorest Britons

Lower-income households are hit much harder by rises in gas and electricity bills.

By Ben Walker

The cost-of-living crisis was already being talked about as early as the second half of 2021. Even before the war in Ukraine, disrupted supply chains and shortages were affecting the cost of energy, leading to higher heating and transport costs, higher prices for goods, and an increased cost of food. The impact of these price rises, however, has not been equally spread.

Institute for Fiscal Studies analysis has found while yearly consumer price inflation will be 10 per cent across all households, the actual consumer price inflation experienced by those in the highest income bracket will be 8 per cent, while those earning the least will experience 14 per cent inflation in the prices of the goods and services they buy.

Many of the measures so far implemented to cope with the cost of living, such as the £400 energy bill grant, have been universal, but the IFS analysis makes it clear that the increases in gas and electricity prices have disproportionately hit less well-off households, which spend a higher proportion of their income on energy. It warns that further increases will only exacerbate this divide.

[See also: Bank of England interest rates: Is recession its only choice?]

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