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Family budgets 'tighter than 2010'

Families are £10 a week worse off than they were a year ago as increases to the cost of living continue to outstrip pay rises, research has indicated.

The typical household had just £172 a week left in March after meeting all of their essential outgoings, such as food, transport and housing, £10 or 5.6% less than 12 months earlier, according to supermarket group Asda.

But despite the fact that families are still worse off than they were a year ago, it was the first time in 14 months that the year-on-year fall in people's disposable income had not been bigger than during the previous month.

The drop was driven by wages continuing to increase at a slower pace than inflation. Gross incomes rose by 2.2% during the year to the end of March but this was more than outstripped by the 4% jump in the Consumer Prices Index (CPI).

But despite CPI still being twice the Bank of England's 2% target, it was lower than the 4.4% it had stood at in February, alleviating the pressure on the Bank of England to raise interest rates in the second quarter.

Food prices fell slightly during the month but transport costs continued to increase as the price of petrol remained high.

Charles Davis, managing economist at the Centre for Economics and Business Research, which compiles the index for Asda, said: "Falling food prices took away some of the pressure on household finances in March - though the rising cost of petrol and transport continues to place downward pressure on discretionary income.

"The latest labour market data shows a fall in unemployment. However, annual earnings growth remains subdued, standing at about half the rate of consumer price inflation. Unless household pay packets grow more strongly over the coming months, the Asda Income Tracker is likely to remain weak throughout much of 2011."

People in London have seen the smallest fall in their discretionary income during the past year due to their higher salaries and the fact that they spend proportionately less on transport than those in other regions.

Families in Northern Ireland have seen the biggest fall, with the amount they have left over after essential outgoings dropping by 11.9% compared with 12 months earlier, due largely to the weak labour market in the region, which has led to job cuts and pay freezes.

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