Last updated 16:42, Friday, 27 June 2008

Rising bills and stagnant wages have made the average family £8 a week worse off than they were a year ago.

Spiralling petrol, food and utility prices, and an increasing debt burden, has seen the average family’s disposable income shrink by 6 per cent after essential bills are met. The figures are based on research by supermarket Asda. A study by Combined Insurance showed that consumers have seen their monthly outgoings soar by 26 per cent during the past two years, driven by higher housing and energy costs.

The Asda research, which was carried out by the centre for economics and business research, found that the average family has an income of £633 a week, 3.6 per cent more than in May 2007.

But the amount of tax and National Insurance people now pay has soared by 6.5 per cent during the same period to £129 a week, leaving people with take-home pay of £533, just 2.9 per cent more than a year earlier. At the same time, the average cost of essential goods, such as spending on food, clothes, housing, utility bills and transport, has risen by 6.2 per cent or £24 a week during the past 12 months, to £402, leaving people with just £131 disposable income.

The rise in spending on essentials has been driven by a 7.9 per cent jump in food prices, while the average family now spends 6.4 per cent more on utility bills than a year ago.

Transport costs have also risen steeply, increasing by 6.2 per cent, with the cost of petrol soaring by 19.5 per cent during the past year.

The report said that while consumer price inflation hit its highest level in 16 years at 3.3 per cent in May, just looking at essential spending for the average UK family, showed the cost of living rose by 3.7 per cent.

It said: “The prices of important essentials such as food, gas, electricity and transport have all risen considerably over the last year – with inflation for all these categories in excess of 6 per cent.”

The research for Combined Insurance found that the amount people spend on bills and living costs has soared from an average of £945 in June 2006 to £1,281 now.

Consumers are spending about a third more on rent and mortgages than they were two years ago and the cost of gas and electricity had risen by 32 per cent.

Council tax has increased by 22 per cent over two years, while car running costs are 34 per cent higher and spending on food has risen by 20 per cent. Families with children have been particularly hard hit, with their average expenditure on child care soaring by 77 per cent since 2006. Other spending on children, such as clothes, has risen 37 per cent.

Shadow chief secretary to the Treasury Philip Hammond said: “Official inflation statistics show prices rising at 3.3 per cent, but these figures produced by Asda reflect what hard-pressed families actually feel in their wallets.

“Maybe this will make Gordon Brown and his ministers realise why people are feeling so miserable.”

A Treasury spokesman said: “This report is misleading. In fact people have seen their tax bill fall in the past year as a result of a cut in the basic rate of tax to its lowest level in 75 years.

“As a result of tax and benefit measures introduced by the Government, this year all households will be on average £1,500 a year better off in real terms, and families with children will be on average £1,800 a year better off in real terms, compared to 1997.

“The Government understands people are feeling the pressures of increasing oil and food prices. Global food prices have risen by 40 per cent in the last year, and oil prices have doubled. These pressures affect all countries, and the Government is working with international partners to take action to get these prices down.”