What does this show?
This chart illustrates how UK households allocated their expenditure in 2013, according to their disposable income levels.
The data, published by the Office for National Statistics this week, demonstrate how certain items of spending are highly contingent on earnings, while others are not.
Do the better-off spend much more?
Of course. Overall, the top-earning fifth of households accounted for 31 per cent of consumption spending, compared to only 13 per cent by the lowest earning quintile.
The point here is that the poorest and the wealthiest households spend very disparate sums on certain things, but similar amounts on others.
Such as . . .?
Housing. Including domestic bills for energy, water and communications, the lowest-earning fifth of households spend a total of £53bn on their accommodation — equivalent to 38 per cent of their spending.
The highest earning quintile spend a total of £61bn, but this is half as much (19 per cent) relative to their total consumption spending.
Research conducted last year by the Resolution Foundation found that close to 1.6m UK households spend more than half their disposable income on housing costs. Most of the “ housing pinched” are low earners, it found, and are more likely to be renting privately in and around London, where high house prices preclude many from mortgage borrowing.
This is borne out by ONS figures, which showed households renting in London spent roughly the same a week (£142) in 2013 as households with mortgages did on average across the UK (£145). Many wealthier and older households of course have paid off any mortgages, lowering their housing costs.
Household spending on food — plus alcohol and cigarettes— is also relatively income “inelastic” (excluding restaurant dining and hotels, which are allocated to “recreation” expenditure). It accounts for 15 per cent of spending for the lowest earning quintile, and 11 per cent for the highest earners.
An anomaly, hidden beneath the headline figures, is that roughly one-third of household spending on education is accounted for by the poorest quintile. This reflects the relatively high number of student houses that fall into this bracket.
Which spending is more correlated to income?
The greatest disparity, unsurprisingly, relates to expenditure on recreational activities.
Including restaurants and hotels (£101bn), recreational spending totalled £206bn in 2013, of which almost two-fifths was attributable to the highest-earning quintile. The bottom fifth of households accounted for only 9 per cent of this expenditure.
What the ONS groups together as “miscellaneous” expenditure is also strongly correlated to household income. Together with health and education spending, consumption of miscellaneous goods and services — ranging from insurance to prostitutes — is skewed towards the wealthy.
Another large component of relatively “elastic” spending is travel, on which the highest-earning cohort spend more than four times as much as the lowest earners.
There is of course a distinction to be made between discretionary travel and spending on vehicles, and fixed costs incurred commuting to work and maintaining a car. The RAC Foundation last year estimated that about 800,000 households spent more than 30 per cent of their disposable income on buying and running a vehicle, although fuel costs have since fallen significantly.
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