Inflation 20% higher for those on tight budgets

Belake Research has been doing some detailed research on differential inflation rates for different sections of the population. The research is not complete, but some of the initial findings are surprising.

Initial findings from research into consumer inflation shows that inflation may be as much as 20% higher for households on the tightest budgets. Between January 2011 and March 2015 consumer prices increased by 9.7%, but this increases to 11.7% amongst households who focus their spending on more essential items. The average annual rate was 2.2% for all households, but 2.6% for households buying the essentials.

Consumer Price Indices are constructed by tracking a 'basket' of goods & services over a period of time, and seeing how their prices change. The basket of goods & services used by the government is designed to measure the experience of inflation of the whole nation. However, if you're on a tight budget, you're restricted in what you can buy, and therefore your basket will contain a different selection of goods & services. Consequently you experience a different rate of inflation based on this different basket. The bad news is that our analysis shows inflation for the most essential items is significantly higher.

Inflation chart

It should be stressed that this research is very much a work in progress, and this is very much a 'live' research project. Final figures are subject to change. However, the first results of our research are very interesting, and have an immediate and direct relevance to policy makers, decision makers and charitable organisations. Therefore we are taking the unusual step of releasing some of our findings early as they will be of particular interest at the current point in time. We aim to release further findings from this active research project as soon as they become available.

Belake Research Ltd undertakes self-funded research from time to time on topics we consider to be of social interest. This is driven by our belief that mathematical & statistical analysis can help inform and benefit society and improve lives. Most recently we have been looking at how inflation affects different parts of the population, and in particular, those who are on the tightest budgets. The aim of the research was to find out if, when a family's buying choices are restricted, and they have to cut back to the essentials, do they experience a different rate of inflation. Note that this is not restricted to low income families. This research applies to anyone who finds their budget tight - for example a middle class family experiencing a drop in income.

The methodology of this research has been exactly the same as that used to produce the Office for National Statistics own Consumer Price Index, as far as physically impossible. The ONS methodology is established and robust, and we are not taking issue with the construction of the national CPI figures, which measure the UK economy as a whole. However, this research does show that different parts of the UK population experience different rates of inflation.