Families losing out as household bills soar

Inflation bites into budgets

Published:

HARD TIMES: Families are an average of £140 a month worse off than they were five years ago.

FAMILIES are an average of £140 a month worse off than they were five years ago after massive hikes in the cost of living, research showed today.

After paying tax and meeting monthly household bills, the average family now has less than 20% of their gross income left, compared with 28% in 2003/2004, according to accountants Ernst & Young.

This leaves most households 15% worse off than in 2003.

Households surveyed were left with an average of only £772.79 to spend each month after paying all of their fixed monthly outgoings, down from £909.84 five years ago.

Jason Gordon, director of retail at Ernst & Young, said: “Many UK consumer segments are clearly feeling the pinch as big rises in household costs are far outstripping relatively modest wage inflation.”

The average family’s total income had gone up from £2,351 to £2,859, an increase of £501, while costs had risen by a greater percentage, particularly in the past year.

Fixed monthly household costs had soared by nearly 45% during the past five years, to take up 53% of people’s total pay.

It said homeowners were shelling out 78% more in mortgage repayments than in 2003/2004 at an average of £735 a month, due to higher interest rates and people taking out bigger loans.

Monthly energy bills had leapt by 110% during the period to average £95.80, while petrol costs for the typical family were 29% higher at £193.61.

Other costs have also increased, with unsecured debt repayments, such as on loans, credit cards and overdrafts, rising by 44% since 2003/2004 to take up £114.81 of people’s income, while council tax was 25% higher at around £114.50.

People were contributing £255.20 into a benefit pension each month, up from £144.26 five years ago.

Increases in energy bills and loan costs, with food price inflation running at 8.7%, was hitting families.

He said: “It’s clear that household budgets are under enormous strain.

“Add in the impact of falling house prices on the consumer’s propensity to spend, and the consumer economy is undoubtedly on a knife-edge.”