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Inflation drop fails to dent the household ‘squeeze’

Household income has continued to decline, putting further downward pressure on people’s long-term savings, data from the Office for National Statistics has revealed.

By Kalpana Fitzpatrick | Published Jun 29, 2012 | comments

According to latest figures, the financial squeeze on British households is still continuing despite a slight decline in inflation rates, with the poorest households paying more and saving less.

The data revealed that the lowest earners have paid an average £7500 a year in direct taxes, such as income tax and council tax. According to ONS, the richest fifth paid 24 per cent of their gross income – £19,700 – while the poorest fifth paid 10 per cent of their gross household income, at £1300. The lowest income groups were particularly hit by paying a higher share of their income in indirect taxes, such as VAT and duties on alcohol and fuel.

The poorest fifth were hit the hardest with indirect taxes, with an increase from 28 per cent to 31 per cent. The richest fifth saw in increase from 12 per cent to 13 per cent in indirect taxes, the ONS found. The average disposable household income fell by around £200, in real terms, between 2009/2010 and 2010/2011.

The largest fall was for the middle fifth of households, with disposable incomes decreasing by 4.3 per cent, from £25,500 to £24,400 – resulting from a decrease in income.

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