Spending power falls by £2,500
THE average family's disposable income has plunged by £2,500 over 12 months in the first drop since 1997, a report warns today.It says the pressure on family finances can be blamed on soaring bills, particularly food and fuel, and poor pay rises.
A typical family has a disposable income of just £14,520, which is 15 per cent less than they had to spend last year.
Disposable income is the money left after tax and essential bills such as mortgages, energy, petrol, food and insurance.
The study by the uSwitch comparison website described the 'shock' fall over the past 12 months as 'unprecedented'.
In the worst affected towns, such as Newcastle, the average family is spending nearly 80 per cent of its income after tax on essential household bills.
In Hull, Nottingham, Blackpool, Glasgow and Southampton families are spending more than 60 per cent on vital expenses.
The soaring cost of feeding a family, massive increase in utility bills, such as a 35 per cent rise in the price charged by gas firms, and higher mortgage costs are hitting cash-strapped families. The report says they must find an extra £145 a month.
One in seven adults - the most since 1979 - are also earning below 40 per cent of the national average household income, according to uSwitch.
It also warns that bosses are going to make the situation worse by awarding poor pay rises. Three quarters of workers will get a below-inflation rise, uSwitch says.
This is effectively a pay cut because it means the extra money is more than swallowed by the rising living costs. At present, the consumer price index measure of inflation is 4.4 per cent.
Ann Robinson, of uSwitch, warned families were facing 'an autumn of discontent'.
She added: 'Consumers are in a lose-lose situation where everything is shooting up except their income.
'It`s Catch 22. They need pay rises to meet the mounting costs of living, but the Bank of England and the Government want to keep rising to a minimum to dampen inflation.'
The Charity Elizabeth Gentlefolk Aid Association - said 250 per cent more professionals such as architects and doctors were seeking help with financial worries.
A spokesman told Radio 4`s Today Programme that often people were plunged into crisis by a particular bill, such as needing a new washing machine.
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