Skip to main content

Families cut household spending to cope with rising energy bills

Households have been forced to cut their spending, as wages struggle to keep up with rocketing gas and electricity bills.

The average UK household had £157 per week of discretionary income in May, which is down by 0.5 per cent, or £1, on a year earlier, according to figures from Asda’s Income Tracker.

This figure remains significantly below the £165 peak which was seen earlier in 2010.

Rocketing gas and electricity bills

According to experts, this drop in disposable income is due to rocketing gas, electricity and water bills, which are further straining the finances of cash-strapped families.

Indeed, this drop is despite the fact that personal tax allowance was increased to £9,440 in the current tax year – up from £8,105 a year earlier. This should mean that families are slightly better off, as the amount of income they pay tax on was cut by over £500 per earner.

Asda chief executive Andy Clarke said: “Last month the increase in personal tax allowance relieved the pressure on family budgets, as green shoots in the economy started to emerge.

“However, the reality of three years of near continuous decline in disposable income means families don’t feel any better off. The fluctuation of disposable income levels throughout 2013 further demonstrates the fragility of spare cash available to families, which is crucial to stimulating economic growth.”

Air fares and clothing pushing up inflation

This comes after recent figures highlighted the financial plight of consumers, with sky-high air fares and increasing clothing and footwear costs lifting inflation being higher than was anticipated.

The Consumer Prices Index inflation rose to 2.7 per cent in May – up from 2.4 per cent in April, according to the Office for National Statistics (ONS).

This means that inflation is still sitting above the Bank of England’s target of two per cent. The last time this figure was achieved was 2009.

Indeed, inflation is expected to rise even further over the coming months, with economists predicting a peak of three per cent. However, after this point it is expected to begin a “slow but steady” drift down.

This will be little comfort to consumers however, with inflation continuing to significantly outstrip wages. Average earning increased by just 1.3 per cent in the year to April, and 0.7 per cent on the previous month, according to the ONS.

Drop in discretionary spending power

Rob Harbron, economist at the Centre for Economics and Business Research, underlined that households are struggling to keep up with the rising price of day-to-day essentials, meaning that discretionary spending power is £8 per week lower than it was in 2010.

“Although reduced motor fuel costs, higher tax free personal allowances and solid job creation in the private sector have helped support household finances, the weakness of earnings growth, capped benefits growth and above-target inflation remain ongoing pressures,” he continued.

Asda’s research works out disposable income based on the money that is left after essentials like taxes, food, bills, transport, clothing and housing costs have been taken into account. The good news is that disposable income has seen a rise from a low of £151 in late 2011.

  • Dr Hector Perera

    I got a scientific way to cook and save about 60% wasting gas. If
    I was proved wrong, I will give away £30,000 yes thirty thousand. What do I get
    if I was right? Imagine millions of people cook in my, how much energy would
    they save? It should worth millions of £ so what do I get? Energy experts please
    come to me on and find out more. I will help the whole
    nation help save energy wastage so what award, a reward do I get? I am sure I
    deserve an award; I show them how to save energy. This is no ordinary cooking
    but cook scientifically on the basis of energy saving. In May 2013 I
    demonstrated it twice, once to ITN TV in Sri Lanka then to a crowd of about
    50 people in South of Colombo. They all accepted my method and some of them
    practice even up to date, they are very thankful to me. So far none of the TV
    stations in England
    have responded to me. Why not these so called Energy experts and even the
    Energy Minister find out what is all this is about? Prove me wrong I will give
    £30,000 what if I am right? Dr Hector Perera

  • Dr Hector Perera

    May I know why these so called energy experts come and see my kind of scientific energy saving cooking? Anybody got to eat so they need to cook. Here I am showing them how to cook and save about 60% gas that is wasted in cooking. Just wearing a few jackets to keep and having a hot cup of tea or coffee would not solve the problem. One needs to eat something like pasta, spaghetti, rice, boiled potatoes, carrots then some even eat chicken curries and vegetable curries, am I correct? Let me show how to cook these kinds of food and save about 60% wasting gas. I have done a demonstration of this type of cooking to ITN TV in Sri Lanka in May 2013 then to a crowd of about 50 people in South of Colombo. Why not the TVs in England give me a chance to show this kind of energy saving cooking to the public? If the energy experts wish to know my kind of energy saving why not come on I am not a cook but I apply the knowledge of science to energy saving.

    • Rajabalzarahni

      Are you a Doctor of Medicine or a Doctor of Gastronomy ?

  • Paul Bird

    struggle each day to live due to price rises gas electric food everybody struggling in 21st century

  • ECOverend

    N power has put standing charges on ALL NO-Standing-Charge Tariffs, almost TRIPLING my bills as a low user [about 1550 KwH /year each fuel], adding 30p/day for gas and 10p/day for electricity, with vat on top of it and any units I use.
    Council Tax / Water bills are up too. This must come out of my other money originally reserved for day-to-day expenses, as I am 57 + unemployed, [and cannot get ANY Government Benefits as I’m living on savings +interest], which has for last year or two exited from higher interest rates on maturing policies.
    Despite being financially astute, I am now eating into my capital [which was being reserved for my retirement], which is being eroded by inflation, and further reducing my future interest and spending power.

    This is particularly ironic, considering my initials, which are E.C.O.

  • ECOverend

    The Comparison sites say I’m on the cheapest tariffs, [since locked in with withdrawal penalties], but NOT ALL figures are taken into account, either by my power provider [annual direct debit / dual fuel discount of £100], or the comparison sites breakdown if given, so I still can’t be 100 percent sure?
    A lot of people including pensioners, are in the same situation as myself, so why has OFGEM [the energy watchdog/ ombudsman, from which there is no appeal] commanded them to phase out NO-Standing-Charge tariffs, instead of the other way round? My power supplier told me it’s no use complaining, but someone must bring it to OFGEM’s attention, otherwise they will think it’s OK to ADD charges to ”simplify” tariffs so customers can compare them! A lot of customers use little or no gas during summer, yet are being charged for the privilege of having it there if needed.