Gap between richest and poorest households widest in 16 years | Cost of living crisis

The gap in inflation rates experienced by the richest and poorest households in the UK is at its highest level in 16 years – another sign that the cost of living crisis is most severe for those least able to cope. offer.

With Boris Johnson and Chancellor Rishi Sunak facing daily pleas from corporate figures and their own MPs to take emergency measures to help ease rising costs, inflation for the poorest 10th households was found to be 1.5 percentage points higher than for the richest 10th. † This is the largest gap since 2006.

The finding, unveiled by the Resolution Foundation think tank, comes shortly after official inflation data showed inflation rose to 9% in April, its highest level in 40 years. Food prices and household energy bills have fueled the crisis and ministers believe it is likely to intensify in the coming months.

The Treasury is preparing to take action but is desperate to focus its efforts on the poorest households amid lingering concerns about the costs and risks of pushing inflation even further. However, it faces opposition within No. 10 over a windfall tax on energy companies to help fund bill cuts.

Yesterday, former Tory leader Iain Duncan Smith called for an immediate increase in benefits in line with inflation to provide a “shield” for the poorest. He said using rebates and special funds to address the problem was “a step in the wrong direction to tackle poverty.”

Last week, former Tory chancellor Norman Lamont urged other leading figures to push for wider action when he called for an increase in universal credit and an easing of the existing discount for warm homes – an idea being promoted by Sunak. investigated. The scheme is currently giving 3 million households in England and Wales £150 off their bills.

A new analysis from the Resolution Foundation shows that inflation for the poorest tenth of households has reached double digits at 10.2%. It is now significantly higher than the 8.7% rate experienced by the wealthiest tenth of households – a high level itself historically. Inequality has widened as poorer households spend a greater proportion of their income on energy. The 1.5% gap is the highest on record, above the last period of significant food price inflation in the early 2010s.

The news comes as a Labor analysis suggested the average family will be nearly £500 worse off this year than predicted before Sunak’s spring statement, when he was criticized for not taking strong enough action against rising household costs. The deteriorating numbers come as inflation forecasted for this year has risen since the statement.

Labor calls for an emergency budget. “These numbers illustrate the disastrous impact price hikes are currently having on families,” said Pat McFadden, chief shadow secretary of the Treasury. “While the government is paralyzed by inaction, ordinary working families are subject to some of the worst inflation in a generation.”

According to the Bank of England projections, the UK is on track for the second largest decline in average household disposable income since the mid-1960s. “Everyone is feeling the effects of the cost of living crisis, fueled by the highest inflation in 40 years,” said Jack Leslie, senior economist at the Resolution Foundation. “With rapidly rising food prices and soaring energy bills driving the recent wave of inflation, low-income families are on the cutting edge. In fact, the cost of living difference between rich and poor households is at its highest level since comparable records began.

“As the government prepares a new round of cost-of-living support, it is clear where it is most needed. The Chancellor should prioritize significant targeted support for low- and middle-income households. Doing this quickly over the coming months will be logistically challenging, but it can be done – whether through the benefit system or through a heavily reformed hot home discount scheme.”

Health Secretary Maria Caulfield said on Saturday the chancellor “didn’t rule anything out” amid calls for an increase in the benefit system. She hinted that further action was planned.

“He is very aware of the struggles families face and will do everything he can,” she told the BBC. “He has shown how agile he can be during the Covid crisis.”

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