Page last updated at 23:14 GMT, Friday, 20 June 2008 00:14 UK

Families 'have 8 less each week'

Shopping basket
Spending on essentials like food has become more expensive

Average families have seen their disposable incomes drop by 8 a week in the past year, research suggests.

The Centre for Economics and Business Research said families had seen their earnings rise by 23 a week, or 3.6%.

But that was outstripped by taxes, which rose 6.5%, and higher bills for essential items such as food and fuel.

This week government figures showed that higher fuel and food bills had driven annual inflation to its highest level for 11 years.

The government's preferred measure of inflation, the consumer price index, rose to 3.3% in May, the highest level since the measure was launched in 1997.

However the retail prices index, still widely followed by wage bargainers, rose to 4.3% and has been above the growth rate for average earnings since the start of 2007.

Stagnation

In his annual Mansion House speech this week, the governor of the Bank of England, Mervyn King, warned that real incomes would stagnate this coming year.

The Centre for Economics and Business Research (CEBR), which was commissioned by Asda to carry out its research, said the average family had an income of 633 a week, which was 3.6% higher than May 2007.

However, it found taxes and national insurance had risen by 6.5% over that time.

Adding in the effect of more expensive essential spending - such as transport fares, utility bills, food, clothes and housing - meant that these families now had, typically, just 131 left to spend on other things - a drop of 6%.

"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%," the CEBR said.

However a Treasury spokesman insisted the report was misleading.

He said: "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."

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