Asda’s latest Income Tracker shows that 40% of the UK’s 28m households had negative discretionary income last month – meaning their take-home pay doesn’t cover the cost of their bills such as groceries, energy and transport, and mortgage payments or rent.
Despite wages going up by almost 3% compared to this time last year, households in the lowest-income quintile had a shortfall of £72 a week last month after paying for essentials.
Asda noted that households had seen their discretionary income fall by over 66% compared to February last year, while the second lowest quintile also did not have enough money to cover essential bills, as their discretionary income has fallen by 112.5% compared to last February.
Low-income households spend a disproportionately larger share of their income on essentials, so increasing inflation and the removal of the Energy Bills Support Scheme means their discretionary income could be further impacted in the coming months.
Discretionary income has decreased for all quintiles, albeit at a less severe rate for higher income households, with the highest quintile’s reducing by just 2.5%, which is mainly due to a 5.2% increase in wage growth year-on-year in February.
On average, disposable income dropped to an average of £207 a week, which is a year-on-year reduction of 12.2%.
Earlier this week, Asda revealed that its profits fell last year, partly due to its decision to sacrifice margin and keep prices low for its cash-strapped customers.
NAM Implications:
- Lockdown fallout in practice?
- Worth repeating: 40% of household’s take-home pay doesn’t cover the cost of their bills such as:
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- groceries, energy and transport
- mortgage payments or rent
-
- And 3% wage increases have not covered 10%+ inflation (Wow!)
- Added to a 66% fall in discretionary income…
- …coupled with 17.5% food price inflation.
- Even non-realists can see where this is all headed:
- Foreclosure/homelessness
- Ill-health and unemployment
- Time for government action, NOW!
