Page last updated at 19:24 GMT, Tuesday, 6 May 2008 20:24 UK

'Squeeze' on household spending

Wallet
Average wages are expanding by just under 4% a year

The share of household income spent on food, bills and other unavoidable costs has risen to 31% from 25% over the past six years, research shows.

Consultancy Capital Economics said the squeeze on discretionary spending is unlikely to ease in the near future.

Mortgage payments, the single biggest outgoing for many households, are likely to dip from 10.7% of income to 10% by 2009 as interest rates fall.

But this will be offset by rises in the cost of energy and food, it said.

Moreover, the increased spending is not likely to be matched by pay rises.

Average earnings growth is set to remain at just under 4% a year, Capital Economics said.

Bills to rise

In response to the figures, Conservative Treasury spokesman Philip Hammond said that rising prices were lowering people's standard of living.

"These figures help to explain why hard-working families across Britain are feeling worse off under Labour," Mr Hammond said.

Capital Economics analyst Vicky Redwood said that gas and electricity bills will rise by around 10% and 8% in the second half of the year.

Water and council tax bills are expected to increase and food inflation is set to remain at its current rate of 6% for the next few months.

Capital Economics also forecast that rents will rise because of increased demand for rental property from prospective first-time buyers finding it difficult to get a mortgage.




RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites


FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC iD

Sign in

BBC navigation

Copyright © 2019 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific