Families nearly £900 short

Families will be nearly £900 worse off this year after the biggest squeeze on living standards since the 1870s.

Soaring energy, food and petrol prices have massively outpaced increases in household incomes over the past year.
Roger Bootle, a leading economist and former Government adviser, says inflation is likely to go above 5 per cent - well ahead of the 2.8 per cent growth in wages.



The resulting gap would see the disposable income of the average household fall by £858 this year.


'Increases in areas like energy, food and petrol are having a really dramatic impact on household budgets,' said Mr Bootle.

'The increase in the cost of energy means inflation is likely to reach a higher peak than previously forecast. I don't think we will see a return to growth in disposable incomes until the end of 2012.'




The adviser to Deloittes believes the official CPI measure of inflation could climb to 5.5 per cent this year. In May it was 4.5 per cent.



He said the decision by Scottish Power to increase its gas tariff by 19 per cent and electricity tariff by 10 per cent will make the situation worse because it will probably be copied by rivals.

 

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