Inflation means mounting bills for stretched families

Despite inflation falling slightly to five per cent today, the high cost of living is putting pressure on the finances of British households, who are already spending over a quarter of their monthly income paying for essential bills.

Research from MoneySupermarket.com sought to establish how much households fork out on essential bills such as utilities, telecoms and insurance (excluding mortgage/rent and debt repayments) and found Brits are spending a whopping 27 per cent of their income just paying for the essentials.

More shockingly, the research shows lower income households are, on average, spending £307 on essential bills each month - around half their earnings after tax, and this is before mortgage, rent or debt repayments are taken into account.

The cost of essential bills was highest in the South East, with respondents paying on average £633 each month, whereas with an average monthly cost of £489, the North West region has the lowest bills.

Kevin Mountford, head of banking at MoneySupermarket commented: "Although inflation fell this month it is still high. This combined with salary freezes across many industries, it's no wonder so many households are spending such a huge proportion of their income on essential bills. Once other costs such as mortgage/rent payments, debt repayment and transport costs are factored in, many British consumers are left with very little money to play with each month.

"The state of the nation's finances is really brought home by a recent study on disposable income from the CEBR, which predicts by 2012 British families will be £3,000 a year worse off than they were before the credit crunch struck in 2007."

Respondents were also asked what their household has left to spend on non-essential items after all essential bills have been paid. While almost a quarter (23 per cent) tend to have enough money left over and can afford to buy all the non-essential items they want, one in five (20 per cent) do not to have any money left over for non-essential items. More shockingly almost three per cent, equating to around 1.3 million consumers, tend to not have enough money even to cover essential household bills.

Consumers in the East Midlands and the East of England were stretched the most, with 26 per cent in each region claiming they tend not to have any money left over for non-essential items after paying bills, whereas just 12 per cent of respondents from the North East had the same problem.

Kevin Mountford continued: "With no sign of inflation falling and the economic situation improving anytime soon, consumers need to ensure they are doing everything in their power to reduce their bills and overall expenditure. Households will be amazed at how much they can trim off their household budget by simply sitting down, going through their finances and shopping around to see where they are overspending. Switching to cheaper products, or moving expensive debts over to cheaper forms of borrowing, can help free up cash which is vital at a time when the cost of living has been putting the nation's wallets under severe pressure."