Housing and utility bills to swallow a third of incomes - UK Politics - UK - The Independent

Housing and utility bills to swallow a third of incomes

Ben Chu

Rising utility bills and soaring rents have ignited a fire under our politicians as they scramble to demonstrate they have a credible plan to ease the pressure on household budgets.

But the great price squeeze could have still further to go, according to a report released today that forecasts the two areas could swallow up a full 30 per cent of budgets by the end of the next decade.

Electricity, gas and water bills and housing costs currently account for 26 per cent of the total spending of the average household, according to the Office for National Statistics (ONS). Housing constitutes around 22 per cent of expenditure while utility bills account for 4 per cent.

That's up sharply on 1963 when the two items together accounted for just 13.5 per cent of a typical household budget. Fifty years ago, Britain was still burning domestic supplies of coal for fuel, and sufficient new housing was being built to meet demand, both of which helped to keep a lid on costs.

In those days, spending on rent and energy as a share of outgoings was dwarfed by food bills, which accounted for 24 per cent of expenditure. Food expenditure as a share of income has fallen dramatically. Grocery bills now account for just 9.2 per cent of household budgets. But energy and rent have gone the other way.

Figures from the ONS point to a sharp acceleration in recent years. In 2007, utility and housing costs accounted for just 21 per cent of household expenditure. Since the financial crisis, average real wages have not risen in the UK. Indeed, they have been in decline as nominal pay rises have been outstripped by high inflation. Yet fuel bills and rents have risen in that time well above the general rate of inflation.

The accountancy firm PricewaterhouseCoopers (PwC) in its UK Economic Outlook, published today, forecasts that the share of household budgets being spent to keep the lights on to pay the mortgage or rent could hit 30 per cent by 2030.

It estimates that housing costs will then be 25 per cent of budgets and utility bills 5 per cent. PwC's forecasts are based on the assumption that new housing supply continues to fall short of demand and that the Government's various subsidies and levies to encourage the decarbonisation of the UK's economy remain in place over the next 15 years.

Households are being urged by politicians to exercise their consumer power in the energy market, by switching fuel providers or to cheaper tariffs to maintain the pressure on suppliers to keep down bills. There is some evidence of that taking place. The price comparison website Moneysupermarket.com reported an increase in the number of people switching energy suppliers in the wake of large hikes by the big six domestic supplier firms. Yet demand for housing and energy are "inelastic", meaning there is only so much that consumer behaviour can achieve in holding down prices.

The fact the two areas could suck up almost a third of household budgets within 15 years will inevitably leave less room for other expenditure, with adverse consequences for other sectors for the economy, according to John Hawksworth of PwC. "It means that other areas of more discretionary spending such will tend to be squeezed" he said. "For people in sectors such as clothing and transport, it will remain a pretty tough environment even after the economy recovers."

The Labour leader Ed Miliband has pledged to freeze energy prices for 20 months if his party wins the next general election. David Cameron is expected to explain this week how he will force water companies to cut bills. The Chancellor, George Osborne, has insisted that his Help to Buy mortgage subsidies will result in a surge of housebuilding, which will keep prices from taking off.

News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Property
Home body: Badger stays safe indoors
property
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
The programme sees four specialists creating what they believe are three perfect couples, based on scientific matchmaking. The couples will not meet until they walk down the aisle together
tvUK wedding show jilted
Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
You've been framed: Henri Matisse's colourful cut-outs at Tate Modern
artWhat makes a smash-hit art show
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Sport
Mikel Arteta pictured during Borussia Dortmund vs Arsenal
champions league
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Arts and Entertainment
Robin Thicke and Pharell Williams in the video of the song, which has been accused of justifying rape
music...and he had 'almost no part' in writing it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

HR Manager - Kent - £45,000

£40000 - £45000 per annum: Ashdown Group: HR Manager / Training Manager (L&D /...

Senior QA Engineer - Agile, SCRUM

£35000 - £50000 per annum + benefits: Ashdown Group: Senior QA Engineer (Agil...

Marketing Executive - West Midlands - £28,000

£26000 - £28000 per annum: Ashdown Group: Digital Marketing Executive (SEO, PP...

Retail Business Analyst

£40000 - £50000 Per Annum: Clearwater People Solutions Ltd: Our retail client ...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week