Ali Hussain
The Sunday Times
The average annual cost of food and drink has risen by 14% over the past decade
The average annual cost of food and drink has risen by 14% over the past decadeALAMY
Extreme weather has helped push up the annual cost of household bills by more than £1,400 over the past decade, according to analysis of official figures.
Money assessed the 13 most common household expenses, including insurance, broadband, water, energy and food, and average wage inflation since 2010.
Our research shows that the annual cost of living per person has risen by £1,443 to £10,969 over the past decade while the average salary has increased by just £884, from £25,220 to £26,104.
The biggest increase has been in the cost of home insurance, which has almost doubled from £159 to £307 for a typical buildings and contents policy.
The UK may not be having the same dramatic weather conditions as Australia, but events such as the 2018 heatwave are a key reason for the cost-of-living increase. Floods and hurricanes have caused a big rise in insurance claims, while the heatwave has led to a surge in building subsidence.
Malcolm Tarling of the Association of British Insurers said: “Extreme and bad weather can impact on the cost of home insurance. In 2018, the Beast from the East cold snap led to a spike in burst-pipe claims.”
Electricity bills showed the second-biggest increase in our research, soaring 43.7% compared with 17.8% for gas. The big difference between the two is down to government moves to tackle climate change by funding renewable electricity sources. Suppliers must foot the initial bill for the new measures, but the cost filters through to customers in the form of higher charges.
Ed Reed of the energy analyst Cornwall Insight said: “The part of the typical household electricity bill attributable to energy policy scheme costs has risen from about 10% at the start of the decade to just under a third.”
Council tax is the third fastest-growing expense, rising 23.8% to £1,750 for the average band D property. The cost of a broadband and phone package is up from £439 to £487, while food and non-alcoholic drinks total £3,151 a year today compared with £2,777 in 2010.
The only decrease is in the cost of car insurance, which is down 1.9%, partly because of an industry-wide campaign against fraudulent whiplash claims.
There is good news on the cost of borrowing. The Bank of England base rate is slightly higher at 0.75% rather than 0.5% in January 2010, but the average mortgage rate has plunged. The typical two-year fixed-rate deal with a 10% deposit came in at 6.6% in 2010; now it is 2.1%.
Savers, however, have seen rates plunge. For example, one-year fixed bonds now pay an average 1% compared with 2.4% a decade ago.