ONS figures show squeeze on household budgets

http://www.theguardian.com/money/2013/dec/11/ons-figures-squeeze-household-budgets

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Soaring energy bills have forced families to spend more than ever on heating and maintaining their homes, according to official figures that illustrate the growing squeeze on household budgets.

Weekly spending on housing costs became the biggest item of expenditure in 2012, outstripping transport for the first time as the cost of energy reached new highs.

The Office for National Statistics said a decline in disposable income since the banking crash had tightened the financial screw on the average household, which had £489 to spend in 2012, compared with £526.40 in 2006 after accounting for inflation.

Labour said the figures illustrated the cost of living crisis affecting most families. Caroline Flint, the shadow energy and climate change secretary, said: "Higher energy bills are one of the main reasons people are finding it harder and harder to make ends meet."

The ONS said the harsh winters of 2011 and 2012 were also likely to have played a part in driving up energy bills.

For the lowest-income families the jump in costs meant they spent 25% of their income on housing, compared with 9% among the richest households.

Lower-income families cut spending on food by almost £1 a week after inflation, according to the ONS, figures that will add fuel to the "heating not eating" debate that is expected to dominate parliamentary discussion of the economy in the runup to the next election.

Overall, the richest 10% of homes spent an average of £1,065.60 a week and the poorest 10% spent £189.30 a week.

An ONS spokesman said families had offset some of the rise in housing costs by cutting down on car journeys, and food spending remained well down on its pre-recession peak. Furniture and garden tools were also singled out by the statistics body as areas where cutbacks had hurt sales.

Spending on recreation and culture has also fallen, though holidays and clothing were protected from austerity measures. "There is strong evidence that people are focusing more on essential items," the spokesman said.

The ONS said weekly spending on petrol (£16.40) and diesel (£8.20) accounted for almost two-fifths of the transport costs. "The price of petrol increased substantially over this period, and it's likely that motorists have responded to this by reducing journeys," it said.

Some of Britain's biggest retailers said the continuing squeeze on family budgets meant they were braced for a difficult Christmas.

Asda's marketing boss, Stephen Smith, said he expected that imminent rises in energy bills would constrain spending through the last few weeks of 2013 and into 2014.

Smith said the supermarket's research into its shoppers' behaviour showed that customers had spent 2% to 6% less of their total Christmas budget than they had at this point last year.

He suggested customers were looking for bargains because they had no more disposable income than in 2012 and an average of £21 a month less than they had in early 2011.

"Things are improving and there is no doubt that the business environment is getting better but that is just not translating to disposable income for the masses," he said.

A series of recent polls have shown that the relief surrounding the recent economic upturn is already beginning to wane.

A YouGov online focus group of people from the "squeezed middle" found they were not yet feeling the benefits of growth.

Stephan Shakespeare, a YouGov spokesman, said: "The picture they painted of their own finances was far removed from the burgeoning economic recovery they've read about in the newspapers.

"Participants all said they had cut down to near bare essentials and were feeling particular pressure being on such a tight budget for Christmas."

He said a 44-year old airline administrator had commented: "I think [the economy recovery] is slight, so not very noticeable to us mere mortals."

A consumer confidence index by YouGov and the economic thinktank Cebr found that consumer optimism could be reaching a plateau. The report said many people relished the rising value of their home and reports of higher GDP growth but their household finances were not keeping pace.

"Our research shows that following a year of economic growth, Britons are still three times more likely to save a cash windfall than spend it," said Shakespeare.

The ONS annual survey, which is based on responses from 5,600 people, showed that a small rise spending on clothes and footwear in 2012 was part of a long-term trend. In 2001 consumers spent £15.30 a week on fashion items; in 2012 the figure had increased to £23.40.

London topped the spending league with an average weekly spend of £571.60, ahead of the south-east on £561.30. Households in the north-east spent the least at £408.70 a week, followed by Wales on £411.30.

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