Rising prices plus stagnant pay equals £50 less a month

SCOTTISH families are about £50 a month worse off last month than they were in July 2010, according to new figures.

Annual inflation, a steep rise in energy costs and significant increases in the price of food means households are 6.4 per cent worse off than last year, according to the Asda Income Tracker.

Since July last year, families’ discretionary income has fallen from £177 a week to £166, with steady month on month decreases since January this year.

Annual inflation on the consumer price index grew again to 4.4 per cent in July, up from 4.2 per cent in June. At well above income growth, inflation is placing significant pressure on household spending power.

Conditions in the labour market also worsened in July, with analysts predicting this will continue into 2012 as public sector cuts start to take effect.

Family budgets are also being squeezed further by the rising costs of basics. Transport costs grew by 16.5 per cent higher in the year to July 2011, according to the AA, while food prices also continued to grow.

Although average earnings increased marginally faster over the year to July, recruiting conditions remained constrained. Pay growth continues at a faster pace in the services sector, at 2.6 per cent over the period, than manufacturing at just 1.1 per cent.

The research was carried for Asda by the Centre for Economics and Business Research (CEBR).

Asda chief executive Andy Clarke said: “The Income Tracker spells out how tough family finances are right now. The maths is simple – the rising cost of feeding the family, getting around and increasing unemployment add up to the biggest squeeze on families since before the last recession.”

Charles Davis, managing economist at CEBR said family incomes were likely to continue to fall into 2012. He said: “The Asda Income Tracker shows that family spending power continues to fall from a year ago. With larger-than-usual rail fare increases allowed for next year and utility price rises set to come in over the coming months, the UK consumer still faces tough times ahead.”

Lucy McTernan, chief executive of Citizens Advice Scotland, said the figures were no surprise and that growing numbers of Scots were visiting Citizens Advice Bureaux because they could not keep up with the rising cost of living.

“For a family who is struggling, it’s very simple: prices are rising all the time, and their incomes are either frozen or falling,” said Ms McTernan.

“You don’t need to be an expert to work out what that means. Many people don’t have enough money to pay the essential bills, like food, fuel and rent/mortgage. And the idea of spending on luxuries, or of putting some money away for the future, is just not an option.”