The latest ‘Family Spending’ report from the Office for National Statistics published earlier this week says that the average UK household spent £489 per week in 2012. Approximately 13% (£64.10) of this went on transport.
Interestingly, this was the first year since 2001/02 (when the data were first collected in a comparable form) when transport wasn’t the biggest single area of household expenditure.
Housing and fuel costs rose from £66.40 in 2011 to £68 in 2012 to ‘top the poll’, whilst transport spending fell from £67.20 in 2011.
So why are people spending less on transport? Probably not because it is getting any cheaper to run a car but rather the opposite; transport remains expensive but the cost of domestic heating is also rising significantly and hard choices have to be made.
The ONS says:
“Prices of domestic energy, such as electricity and gas, have increased in the UK over recent years. Households may have had limited opportunity to reduce their usage of these fuels, leading to higher expenditure over a period of price rises.”
Looking at transport spending in particular, the ONS suggests:
“A significant factor is likely to be spending on petrol and diesel. The prices for both types of motor fuel have increased over recent years, and there is evidence that households have taken steps to reduce the amounts used. The 2011 Census showed that fewer people are driving to work, compared with 2001, and more were using public transport, while the National Travel Survey reported a fall in the number of journeys taken by private transport between the mid 1990s and 2012. Furthermore, fuel efficiency in car engines has improved and there is evidence more people are using diesel engine vehicles in an effort to reduce spending.”
This is not quite right. Actually, as our report out earlier this month showed, a record 16.7 million people are now driving to work or getting a lift. What is true is that the proportions have fallen slightly over the past decade but this has been offset by a rise in population. These are the commuting by car (or van) figures:
1981 10.6 million
1991 13.1 million
2001 14.5 million
2011 15.8 million
2011 16.7 million
Spending on transport did not just drop in 2012 but has been in more or less continuous decline since 2001/02, when the average UK household spent £87.10 (in 2012) prices. This is equivalent to a drop in spending of over a quarter over the past decade. Commenting on this, the ONS reiterates that:
“The price of petrol increased substantially over this period, and it’s likely that motorists have responded to this by reducing journeys.”
There we go. In the short term demand for fuel is relatively price inelastic. But faced with long term price rises, over time people try to adapt behaviour at the margins to cut back on usage. (There is also another factor at play. While the day to day running costs of owing a car have far outstripped inflation, the cost of buying a car – new and second hand – has fallen over recent years. Of course day to day running costs are for many a largely unavoidable expense while forking out large sums for a car – and even with price reductions car purchases are still major pieces of expenditure – is something that most of us can defer.)
But adapting travel habits only goes so far and in spite of these likely cutbacks the latest data indicate that the average UK household is still spending almost two fifths (38%) of its total transport expenditure on fuel. No wonder the chancellor used the recent Autumn Statement to confirm the freeze in fuel duty he had proposed at this year’s Conservative conference.