London's cost of living tracker shows us how much more different types of households would have to spend to maintain the same standard of living today as they had in 2020. And which household types are most likely to have had to scale back on essentials. Here we outline what the most recent inflation figures show us.
What’s new?
Over the last four months, inflation in the UK has steadily dropped, and currently sits at 6.3%. Despite this drop, the squeeze facing low-income Londoners remains incredibly tight. To maintain the same standard of living as in 2020, Londoners on the lowest incomes would now need to spend 27% extra per week – compared to 25% extra per week for Londoners on the highest income.
Inflation impact - the estimated percentage change in spending for London households, if buying the same goods and services (April 2020 - August 2023)
For lower income households, this price increase is disproportionately driven by rising costs of essentials. Of the 27% extra a week the lowest income Londoners would need to spend to maintain the same standard of living pre-pandemic, 11% is made up of just two essential categories – food and energy.
For Londoners on the highest incomes, these two categories make up 5% of the total price increase of 25%.
Inflation impact - percentage change in prices of goods and services for household income quintiles in London (August 2023)
The impact of inflation on different housing tenure types
This month we also added a new feature to the cost of living tracker, allowing you to look at the impact of inflation on different housing tenure types.
To maintain the same standard of living they had in 2020, those who own their homes outright would have the biggest increase in cost of 29%, followed by social renters (27%), mortgage holders (24%) and private renters (24%).
However, the makeup of spending of these groups is very different. Before the pandemic, more than half of private renters' expenditure (52%) was spent on three essential categories: housing, food and energy. For those in the social rented sector, the figure was 44% - compared to 34% for mortgage holders, and 18% for outright owners.
Although outright owners would see the largest increase in cost to have the same standard of living as in 2020, this increase is disproportionately made up of leisure activities - 8% of the 29%, compared to 4% for private and social renters.
By contrast, the increase for private and social renters is largely driven by the essentials (housing, food and energy). For private renters, 11% of their 24% increase is made up of these categories - compared to 14% for social renters, and 8% for outright owners.
This shows that although those who own their homes outright would see the biggest increase in cost to have the same standard of living as in 2020, they may also have the most room to cut back. Social and private renters, by contrast, spend a much higher proportion of their total expenditure on essentials, and may not be able to cut back as easily.
