We’ve less disposable income- and what we have isn’t going to the High Street
We know things are tough, and that prices are on the increase, but now someone has actually bothered to crunch the numbers and has discovered that the overall cost of running a household has increased by 25% in just five years, with some bills going up by as much as 67%.
Of course, energy bills are among the worst culprits, with gas and electricity charges going up 52% and 32% respectively, but it is comprehensive car insurance that has suffered the biggest rise, owing to increased claims and EU regulation on top of rising prices. Add fuel, with a 33% rise, and driving households are paying out way more than they used to.
New research from comparison site uSwitch.com also shows that food bills are up 17% since 2008 with the average weekly shopping bill rising from £220 to £256 a week. Over half of those surveyed (55%) say that the rising cost of living is their biggest cause for concern at the moment, compared with 29% who are most concerned about their health. Presumably no-one is that concerned about dying of malnutrition, starvation or hypothermia then.
Part of the problem comes because average salaries have not kept pace with increased costs. Despite rising inflation, wages have only risen 6% in the whole five years- from £24,900 a year in 2008 to £26,500 at the end of 2012. Once you take inflation into account, however, wages have actually gone back to 2003 levels. Just one in two consumers (52%) have had a pay rise this year; more than one in three (36%) have had their pay frozen for 12 months or more and one in eight (13%) have actually had their pay cut.
But according to uSwitch, almost 60% of consumers fear next week's Budget will hit their already battered pockets even harder. Two thirds of consumers would support the introduction of a 'mansion tax' on homes worth over £2 million, and 84% are calling for the personal tax allowance to be raised beyond £10,000 despite the previously announced higher-than-inflation uplift to £9,440 for 2013/14. 85% believe that the Chancellor does not understand the financial fears of ordinary people and 71% say that their financial situation has worsened since the Coalition came to power in 2010.
Michael Ossei, personal finance expert at uSwitch.com, said: "Consumers are anticipating next week's Budget with a mix of dread and despair. Spiralling living costs are stretching household budgets to their absolute limit and people are running out of ways to fund their ever-increasing bills. With salaries failing to deliver, many are being forced to turn to debt just to stay afloat. Unfortunately, the most accessible forms of debt are often the most dangerous.”
Talking of debt, however, having less disposable income isn’t necessarily stopping people spending. New figures from Barclaycard indicate an increase in consumer spending- jumping by 4.2% last month, which is the fastest rate in more than a year.
Nevertheless, the recent doom and gloom from the high street is not set to end just yet. The figures show that the increases are not in retails- spending on men’s clothing was down by almost 6% and even women’s clothing sales were down almost 2%. What people are spending their money credit on is on the finer things in life, with leisure and travel the big winners; spending with airlines was up 14% compared with the same period last year, and in restaurants it was up by over 11%.
Of course, everyone’s situation is different, and it may be that the people struggling to make ends meet are not the same people who are flying off to fancy restaurants. Perhaps the wealthy are going on more holidays, while the common populace wring their hands in despair? Surely that can't have been the
Conservative Coalition Government's plan...