Spending power has fallen for most of Britain’s households for the fourth month in a row ahead of the Budget tax raid, an income tracker revealed today.
Low and middle-income families who make up 60 per cent of households face a continued squeeze on discretionary incomes when compared with a year ago.
Families in the lowest three income quintiles saw annual earnings growth in the year to October outpaced by rises in tax payments and the cost of essential spending.
Food, housing and utilities make up a higher proportion of spending for lower income households – and these costs grew faster in October than overall inflation.
Earners in the bottom 20 per cent ended each week with a £74 shortfall – meaning they could not cover essential bills. That figure is 7 per cent worse than a year ago.
Those in the second lowest 20 per cent of earners had only £10 left at the end of each week after essentials, which was 17 per cent worse the previous year.
Households in the middle fifth of earners had £90 remaining which was a marginal fall of 1 per cent on a year ago, according to Asda’s latest income tracker.
But the situation was much better for higher earners, with those in the top 20 per cent ending the week with £909 spare, an annual increase of 2 per cent.
Chancellor Rachel Reeves leaves 11 Downing Street ahead of the Budget in October 2024
Those in the second highest 20 per cent of incomes finished the week with £285, a slight increase of 1 per cent on a year before.
Researchers give the mean incomes for each quintile (or 20 per cent) as, starting with the lowest, £11,000, £25,000, £41,000, £66,000 and £137,000.
The study also revealed essential costs rose 4.6 per cent year-on-year for the average household.
Households aged 30 to 49 faced the highest essential spend at £799 and tax payments at £281.
Those under 30 dedicate the largest proportion of their gross income to essential spending at 69 per cent, partly because they are disproportionately exposed to high rental costs.
The Centre for Economics and Business Research (Cebr), which compiles the data for Asda each month, also warned further pressures may emerge as the Christmas period approaches and Chancellor Rachel Reeves prepares to deliver the Budget on Wednesday.
Sam Miley, head of forecasting and thought leadership at Cebr, said: ‘While the outturn inflation data for October supports Cebr’s view that inflationary pressures have peaked, there remain considerable risks to the outlook for the income tracker.
‘Worse than expected labour market figures for September illustrate that the UK labour market has been weakened by raised employment costs and weak demand.
‘Prospects for the UK economy are also not helped by the high likelihood of fiscal contraction in the November Budget.
‘With households and business alike nervously waiting to see how much of the fiscal burden will be placed on their shoulders, there could well be risks ahead for the income tracker.’
The overall income tracker recorded annual growth of 1.3 per cent in October, an increase of 0.9 per cent in September.
However, the tracker fell by £1.01 month-on-month, down by 0.4 per cent from September.
Average household purchasing power now stands at £253 per week, the same figure that was recorded in December last year.
Gross income for the mean UK household grew by 3.6 per cent in October, slowing slightly from September’s growth of 3.7 per cent.
Households aged 30 to 49 had the highest average weekly gross income, amounting to £1,384 in October.
The next best group was those aged 50 to 64 with a figure of £1,264.
Growth in gross incomes was highest among those aged 30 to 49 and 50 to 64, at 4.1 per cent for both groups.
