UK household incomes less squeezed than official data suggests, shows new research

The research strips out items from the main government inflation index, like rugs, door handles and a ten-pin bowling session

The biggest increase was in the cost of insurance, at 7.6 per cent (Getty)

The battered pound and Brexit jitters might have left us feeling worse off, but data on Wednesday suggests that household bills are actually rising more slowly than the official rate of inflation.

Research by consumer finance website MoneySavingExpert.com shows that the cost of living – which takes into account things like rent, utility bills, insurance payments and council tax – increased by 2.1 per cent over the last year. That’s lower than the 2.6 per cent increase in the official Consumer Price Index and is broadly in-line with average earnings growth.

MSE’s tracker focuses on what it deems to be the unavoidable costs of living and strips out items from the main government inflation index, which is considered to be the most comprehensive measure of inflation and is calculated based on a “basket” of around 700 goods and services, including things like rugs, door handles and a ten-pin bowling session.

MSE takes about 40 costs into account which it says the average UK household is likely to face each month.

Despite the research showing only a moderate rise in the overall cost of running a household in the UK, it highlights a particularly sharp rise in some expenses.

In the 12 months to July, average energy costs increased by 5.1 per cent. The biggest increase was in the cost of insurance, at 7.6 per cent. Motor vehicle insurance and travel insurance saw the biggest changes of 12.8 per cent and 12.4 per cent respectively.

“It’s cold comfort for many, but there are things you can do to ease the pinch,” said Guy Anker, managing editor at MoneySavingExpert.com.

“The average home can save £300 a year by switching energy provider, you can tackle sky-high insurance costs with a quick comparison, and we know that many make huge savings by haggling with their broadband, phone and TV providers,” he said.

“Spending just a few hours on your outgoings can save hundreds, if not thousands, so it’s well worth doing as costs keep rising.”

Earlier this month, a report from the Bank of England’s network of regional agents showed that employers around the UK are planning pay rises clustered around 2 to 3 per cent, despite reporting heightened difficulties in recruitment.

Before the financial crisis, however, average annual pay growth was running at around 4 per cent a year.