Families worse off in 2008

The rising cost of living has left families, on average, £5 a week worse off this year.

Research by the Centre for Economics and Business Research (Cebr) found the average household had just £138 a week left in January after meeting all their essential costs, such as food, clothes, housing, bills and transport.

It said that despite average earnings being £21 a week higher, the amount of money families had left for discretionary spending was 3.2 per cent lower than during the same period last year.

The fall was driven by a 4.9 per cent jump in the cost of living, with the biggest increase in the cost of petrol, which soared by 19 per cent year-on-year to reach 103.9p a litre.

This contributed to a 6.4 per cent rise in transport costs, while food prices were 6.1 per cent higher than a year ago as the ongoing demand for bio-fuels pushed up prices of basic ingredients.

Cebr said ongoing high energy and food prices means the downward trend in disposable income is likely to continue.

Overall, households had an average of £653 coming in each week during January, on which they paid £127 in tax, leaving them with £526.

Cebr said earnings were 3.8 per cent higher in January than a year earlier, but taxation remained high, leading to a rise of just 2.6 per cent in people's take home pay.

It said earnings growth was 0.2 per cent lower than it had been in December, and warned that it was likely to remain subdued during 2008 as the economy cools.

Meanwhile, a Treasury spokesman said families were on average considerably better off than a decade ago and paid less net tax.

He said: "According to the Oecd, tax paid by the average working family has been halved over the last decade, while household wealth increased by more than 60 per cent.

"As a result of tax and benefit measures introduced by the Government, this year all households will be on average £1,000 a year better off in real terms than a decade ago. From April, families with children will be on average £1,550 a year better off."

© Independent Television News Limited 2008. All rights reserved.