Lowest income households hit hardest by inflation
(28 March 2007)

The households with the lowest income are facing the highest rise in living costs since last month's inflation increase, according to new research.

A two-year study conducted by the Alliance Trust research centre showed that inflation for families on the breadline (an annual income of less than £7,000) is 34 per cent higher than the headline figure.

The difference in inflation levels is due to low income households spending 41 per cent of their budget on basic goods and necessities, including housing, utilities and food, compared to the highest income households which spend 17 per cent of their budget on these items.

Shona Dobbie, head of the group's research centre, said: "Our two-year study has shown consistently that the UK’s lowest income groups are facing an inflation rate which is substantially higher than the average headline inflation rate.

"This is a direct result of this income group’s shopping basket."

She added that it is "inevitable" that the lowest income group will spend more of their budget on the necessities and that it is these items that have seen the sharpest price increase.

Meanwhile, following Gordon Brown's Budget last week, the Institute of Fiscal Studies has claimed that those who lose out are single people earning between £12,000 and £18,000.