Families are £2,500 worse off than they were last year as rising food, fuel, energy and tax bills have dragged disposable incomes to the lowest level since Labour came to power in 1997, a new survey suggests. The average family has £1,210 a month to spend after covering essential bills, down from £1,425 last year. This is the first time households have seen their disposable income fall in more than a decade. But despite the pressure on home-owners’ wallets, wages are rising slower than inflation, with one in three people getting no rise at all this year. The overall cost of essentials such as clothes, food, fuel and mortgages, have risen by an average of 8 per cent, the survey from uSwitch, the price comparison website, showed. This is far higher than the official inflation rate which in July rose to a 16-year high of 4.4 per cent. The price of food has rocketed by 25 per cent since last year, figures from supermarkets show, while unleaded petrol is nearly a third more expensive. The uSwitch site said that further price rises by energy companies could push gas and electricity bills for an average home up by 61 per cent to £1,467 by the end of the year. Rising taxes are also cutting the so-pending power of families, with tax and national insurance contributions accounting for more than a fifth of the average gross household income, the highest in nearly two decades. The average household pays £7,413 in tax each year, up from £7,010 last year. National insurance bills have jumped by more than £150 to £3,507 a year.

The drastic fall in households’ disposable income comes as Britain is on the brink of recession, with the prospect of thousands of job cuts. The economy stalled in the three months to June, official figures showed last week, as output failed to grow at all. Salaries are rising more slowly than inflation at 3.4 per cent a year. About 35 per cent of workers, nine million people , will get no pay rise this year. The Bank of England has forecast that the official measure of inflation will rise to 5 per cent before the year end. Public expectations about inflation also worsened in August. Responses to a LloydsTSB survey, seeking forecasts of inflation in 12 months, averaged 5 per cent, up from 4.8 per cent in July.

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