Gap between rich and poor widens as inflation hits 41-year high

Gap between rich and poor widens as inflation hits 41-year high

Updated: 17 days, 20 hours, 27 minutes, 54 seconds ago

THE cost of living gap between rich and poor widened as UK inflation hit a four-decade high at 11.1% fuelled by the biggest rise in food prices in 45 years.

Low income households are being hit hardest as the UK’s annual inflation rate rosed to 11.1% in October, after millions of households were hit by higher energy bills.

That’s up from 10.1% in September, as the cost of living crisis escalates, and further above the Bank of England’s target of 2%.

The Office for National Statistics (ONS) revealed the increase, as the cost of light and heating for homes rose further despite help from the government's energy price guarantee that limits wholesale charges for gas and power.

The Prime Minister said inflation was “the enemy we need to face down” but “difficult decisions” would be required in the Chancellor's autumn statement.

Rishi Sunak said Jeremy Hunt would set out a plan to “grip” inflation in his autumn statement adding: “My absolute number one priority is making sure that we deal with the economic situation that we face at home.

“With more news of inflation today, it’s the number one thing that’s on people’s minds.

“It’s the thing that’s causing most anxiety, opening up bills, seeing the emails come in with rising prices. And that’s why it’s right that we grip it.

Households were hit by the biggest rise in food prices in 45 years.

Food and non-alcoholic beverage prices rose by 16.2% in the 12 months to October 2022, up from 14.5% in September 2022.

That’s the highest since September 1977, the ONS estimates.

But surging energy prices have been the main driver of the cost of living crisis - mostly a consequence of Russia's invasion of Ukraine in February that sent the cost of many commodities such as wheat, and the cost of producing them, through the roof.

ONS estimates that without the implementation of Liz Truss's energy price freeze, electricity, gas and other fuels prices would have risen by nearly 75% between September and October 2022 - instead of 25% The EPG meant average dual fuel bills rose by £2,500 per year in October – although there was no limit on how high bills could go. Without it, The costs cap imposed by the regulator Ofgem would have lifted the price cap to an average of £3,549, up from £1971.

It is low income households, which spend more of their money on energy and food, that are suffered the biggest jump in the cost of living, while high income households were less hit.

ONS said the poorest 10% of households were hit by a 12.5% rise in their living costs – more than the average of 11.1% – while the richest 10% experienced inflation of 9.6%.

The poorest 30% of families all experienced the highest inflation.

The ONS says the gap between low and high income household inflation rates is the largest since March 2009.

The Bank of England had expected that inflation would have gone above 13% last month without the government energy bill intervention because average annual bills under the Ofgem-set price cap would have skyrocketed to around £3,450.

The Chancellor Jeremy Hunt is tipped to protect the most vulnerable from the worst by raising benefits and pensions in line with inflation but has warned that we all face higher taxes to help balance the books.

Grant Fitzner, chief economist at the ONS said: “Rising gas and electricity prices drove headline inflation to its highest level for over 40 years, despite the Energy Price Guarantee.

“Over the past year, gas prices have climbed nearly 130% while electricity has risen by around 66%.

“Increases across a range of food items also pushed up inflation.

“These were partially offset by motor fuels, where average petrol prices fell on the month, while the price for diesel rose taking the disparity in price between the two fuels to the highest on record.

Average petrol and diesel prices stood at 163.6p and 183.9p per litre, respectively, in October 2022, compared with 138.6p and 142.2p per litre a year earlier.

Petrol prices fell by 2.9 pence per litre on the month while diesel prices rose by 2.3 pence per litre.

Jack Leslie, senior economist at the Resolution Foundation, says government has to do more to bridge the cost of living gap between rich and poor: “Everyone in Britain is affected by double digit inflation – which has caused pay packets to shrink at record rates. But some groups are more effected than others, and Britain now has a significant cost-of-living gap between rich and poor household," he said.

“Rising energy bills and rapid food prices mean that low-income households now face an effective average inflation rate of around 12.5 per cent, while in the cold winter months, the over 80s are already facing inflation rates of around 15.3 per cent.

“This shows why the Chancellor needs to protect vulnerable households through the ongoing cost-of-living crisis when he sets out his Autumn Statement.”

Frances O’Grady, general secretary of the Trades Union Congress (TUC), said: “Britain’s cost-of-living emergency is getting worse by the day. Family budgets are being shredded as the cost of food and energy skyrockets.

“The Government must stop playing games and uprate pensions and benefits in line with inflation.

“But we need more than sticking plaster fixes. Unless we get pay rising across the economy we’ll keep lurching from crisis to crisis.

“We can’t be a country where nurses and teaching assistants are having to use foodbanks to get by.

“If ministers continue to hold down wages in the public sector millions of key workers will face years more of hardship.”

Jeremy Hunt blamed the impact of the pandemic and Vladimir Putin’s war in Ukraine for the spike in prices as he warned that “tough” decisions on tax and spending would be needed in Thursday’s autumn statement.

“The aftershock of Covid and Putin’s invasion of Ukraine is driving up inflation in the UK and around the world,” he said.

“This insidious tax is eating into pay cheques, household budgets and savings, while thwarting any chance of long-term economic growth.

“It is our duty to help the Bank of England in their mission to return inflation to target by acting responsibly with the nation’s finances. That requires some tough but necessary decisions on tax and spending to help balance the books.

“We cannot have long-term, sustainable growth with high inflation. Tomorrow I will set out a plan to get debt falling, deliver stability, and drive down inflation while protecting the most vulnerable.”

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