Enjoy the ‘good times’ while you can – it’ll be even worse by 2030
RISING household costs are reducing living standards even as incomes have doubled, according to a new report.
Food, housing, utility and transport costs have all increased in the past five decades and the amount available to spend on anything but essentials has dropped to its lowest level in more than 20 years, said consumer group Which?.
In a report to mark 55 years since Which? launched, it found that housing costs have increased from 13 per cent of household income to almost a quarter. Transport has also risen from 10 per cent to 15 per cent and is expected to reach 17 per cent by 2030.
While food and drink costs have decreased as a proportion of spending, from 24 per cent to 10 per cent, prices are now rising faster than inflation.
The report, which did not provide separate figures for Scotland, said personal debt has now reached a total of £1.5 trillion, forcing consumers to choose between household priorities.
Which? executive director Richard Lloyd said: “With the economy still in recession, debt levels are rising and costs are set to increase, forcing consumers to make tough choices between the things we regard as essential right now, like broadband and phones, and the bare necessities such as housing, food and fuel.
The average weekly gross income was £18 in the 1960s, equivalent to about £323 in 2010 prices. By 2010, that weekly income had risen to £700 a week.
As well as rising prices, consumers have different spending priorities. The report said that in 1970, only 30 per cent of households had central heating, compared with 96 per cent in 2010.
Similarly, 35 per cent had a telephone four decades ago, compared to 87 per cent today. While 65 per cent of homes had washing machines, the figure is now 96 per cent, and 75 per cent now have a car or van, compared with 52 per cent in 1970.
As well as changing spending habits, household sizes have shrunk, said Which? as mortgage pressures increase. Rising rent costs and recovering house prices are expected to push up to more than 28 per cent by 2030. The current mortgage-to-income ratio is 240 per cent, with 16 per cent of people with a ratio of at least 450 per cent, risking repossession.
While consumers are seeing rising food prices at the supermarket counter, they are down in relation to 1963 prices, hitting a low of 8.7 per cent of household spending in 2005. That has now climbed and could hit 10.3 per cent by 2030, still substantially less than the 24 per cent of nearly 50 years ago.
Fuel bills are expected to rise from 4.3 per cent this year to 6.2 per cent by 2030, as a portion of household spending.
The report adds: “The concept of ‘ownership’ has evolved, as the amount we ‘possess’ in digital format can have as much meaning as physical possessions.
“We’ve radically changed what we consider as essential – 43 per cent of people would cut back on food if they had to, but fewer would give up broadband or mobile phones. The last six decades have seen a transformation in what we consume and how. And the pace of change doesn’t appear to be slowing.”
In a separate report, the Axa Big Money Index found that almost one in seven across all groups cannot see a time when their income will cover their outgoings, rising to one in five among the most “stretched”.
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