In our latest blog, Statistics Regulators Vicky Stone and Chris Davies look at the role of statistics in the Cost of Living Crisis debate.

As the UK’s statistics regulator, our vision is simple. Statistics should serve the public good – and to meet this ambition, in part, statistics should be able to answer questions that users are interested in. 

A very current and topical question in our minds at present is how well do statistics inform the debate around the cost-of-living crisis and are there any data gaps? Whilst on the face of it this is a very simple question, the cost-of-living crisis is actually a very tricky concept to unpick and understand.  

The statistical system currently provides a range of high-quality statistics that measure component parts, such as income and earnings, prices, inflation, household spending patterns, income-based poverty, and fuel poverty statistics. This blog focuses on data gaps identified within three of the component parts; understanding increases in prices, the impact on family resources and spending and levels of income-based poverty.

Many households are facing increases in expenditure on different goods and services – and this varies from household to household.  Increasing prices of essential items such as food and energy may impact on the financial position of households and may also have an impact on overall poverty levels. For example, the Resolution Foundation estimates that an extra 1.3 million people will fall into absolute poverty in 2023, including 500,000 children. 

Statistics are needed to inform our understanding on how rising fuel, energy and food prices are affecting different households and people across the UK. Statistical producers have responded well to user demand for additional information on the cost-of-living crisis. This blog acknowledges some great work through case studies and identifies data gaps in three areas. 

The impact of inflation on households with varying incomes

Headline rates of inflation, or the general increase in prices, are well captured by the Office for National Statistics (ONS) current suite of inflation statistics. However, there is a remaining challenge in understanding varying inflation faced by those on different incomes. Using new data sources, including scanner and web scraped data, ONS is developing measures of inflation which reflect the lived inflation experience of households. These measures include a personal inflation calculator, for people to measure the affect cost of living increases has had on them in the past year; Household Cost Indices, which measure UK households’ experience of changing prices and costs; an analysis of lowest cost items, which will for example, identify lower-price items for a shopping list of essential items; and bespoke analysis on Inflation and the cost of living of UK Households, overview June 2022. 

These measures, along with subgroup analysis of the Consumer Prices Index including owner occupiers’ housing costs (CPIH) and the Consumer Prices Index (CPI), represent part of ONS’s Transformation of Consumer Prices and Cost of Living analysis programmes, which in part, have been developed to respond to the public debate led by Jack Monroe on the representativeness of official measures of price inflation for individuals on low incomes. 

Case study 1: Filling the data gaps

On 30 May 2022, ONS published experimental analysis tracking the price of the lowest-cost grocery items, UK, experimental analysis: April 2021 to April 2022 as a first step to understanding varying price inflation experienced by individuals on low incomes.

A summary of ONS’s current and future analytical work related to cost of living is available here.

The impact of increasing costs on family resources and spending

Statistics on income and spending are generally presented on a household basis and based on surveys covering people living in private households, such as the Family Resources Survey (FRS) and the Living Costs and Food Survey (LCF). In our review of income-based poverty statistics we identified a number of data gaps in coverage and granularity of the statistics. Household surveys exclude homeless people and those not residing in private households, such as care homes, halls of residence and prisons. These groups are likely to be living at the lowest end of the income distribution and therefore are an important omission from the statistics.

More recently, the Inclusive Data Taskforce 2021 report also identified a number of critical gaps in the collection of personal characteristic data. A number of groups were repeatedly identified with basic demographic information missing, such as non-household populations. In line with recommendations of that report, the recording of demographic information must be improved to ensure more data inclusivity.

Case study 2: Filling the data gaps

Following our assessment in 2021 of the LCF survey, ONS has demonstrated its commitment to improve the statistics in line with our requirements and recommendations. We are encouraged to hear that the Household Financial Statistics Transformation (HFST) project aims to exploit alternative data sources to establish a more integrated and efficient survey of household finances. DWP is also investing in the Family Resources Survey by introducing a significant boost in the sample and making good progress on a transformation programme to integrate survey and administrative data. This work aims to improve the quality, timeliness and granularity of the statistics, to improve insight and understanding of income, wealth, spending and financial resilience across the UK.

The impact on levels of income-based poverty

The concept of poverty means different things to different people and there are a number of different measures commonly used to understand income-based poverty. The UK’s official poverty estimates are published in the annual Household Below Average Income (HBAI) statistics by the Department for Work and Pensions (DWP); with the latest statistics published in March 2022, covering up to FYE 2021. The same week, ONS published its annual household income inequality statistics also providing estimates of household incomes and inequality in the UK covering FYE 2021. Whilst these statistics are the official sources on household and individual incomes in the UK, they do not cover most recent effects of rising living costs; as highlighted by the Joseph Rowntree Foundation. 

OSR 2021 Poverty review

Our review of income-based poverty statistics was published in May 2021 and whilst many of our recommendations still stand – we have seen some good progress in response to our work including;

Case study 3: Filling the data gaps

ONS regularly publishes insightful analysis on the cost of living in Great Britain using the Opinions and Lifestyle Survey. The survey was adapted quickly to collect social insights data during the COVID-19 pandemic and covers impact on health and wellbeing and goods shortages as well as the cost of living. Data are published on the ONS website, most recently via the Public Opinions and Social Trends bulletin, and is available to accredited researchers via the Secure Research Service (SRS).

Looking Forward

As the cost-of living crisis continues to unfold, people will want to know how increasing prices will affect them and understand associated levels of income-based poverty – and plugging the data gaps will be crucial in understanding the complexities more fully to make change and ease the burden on people. 

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