All demographics will see costs increase by about 2.7 per cent, IFS finds
The fall in sterling is driving up cost of living across all demographics and income groups, the IFS has observed, with households expected to face an average increase of about 2.7 per cent.
The analysis was released today, after the ONS announced that CPI inflation rose to 0.9 per cent in the year to October.
Since about 40 per cent of food is imported, it is expected to experience a relatively high price increase of about 2.9 per cent. This effect is already already starting to appear, albeit in the trivialised form of Marmite-gate and Toblerone-gate.
The rise in food prices will hit poor households particularly hard, since poor families spent 25 per cent of their income on food, compared to the 16 per cent average.
While wealthier households will be hit disproportionately by increases in holiday, furniture and costs, that’s because many poor households do not spend on these items in the first place. Moreover, holiday or furniture costs can typically be reduced more easily than food intake, and wealthier households are better able to absorb increased costs.
Recognising the threat rising costs presents to many families’ living standards, TUC general secretary Frances O’Grady has called on Philip Hammond to ‘use the Autumn Statement to end the public sector pay cap and announce an increase to the national minimum wage.’
Susan Kramer of the Liberal Democrats also called for government action, arguing that their ‘blinkered attitude to Brexit’ is preventing them from seeing the warning signs.
‘They should be leading by example,’ she continued. ‘Ensuring that teachers, nurses and public sector workers get a proper pay rise to cope with rising prices, rather than continuing to cap pay increases at one per cent.’
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