Families are £7 a week worse off than in February last year despite an increase in salaries, according to a report.

The average household income last month was £17 a week higher than at the same time last year but families are paying an extra £24 in increased tax and household bills.

This has cut the average family’s disposable income to £133 a week, down from £135 in January and £140 in February last year, the study by the Centre for Economics and Business Research has shown.

The average family’s gross income was £655 in February, up 2.6 per cent on last year. But this was outpaced by increases in income tax and national insurance, which rose by 3.7 per cent.

Mervyn King, Governor of the Bank of England, said yesterday that households would face pressure as wages failed to keep up with food, petrol and energy bills. He said: “Our standard of living is going to rise much less quickly than if these price[s] . . . had not increased.” Transport costs have risen by 6.2 per cent in the past year; a tankful of petrol costs 20 per cent more, and the cost of running a car has risen by 12.3 per cent.

The study says that the cost of food and nonalcoholic drinks rose by 5.6 per cent in the year to February 2008, and the price of cereals and bread increased by nearly 8 per cent. Andy Bond, chief executive of Asda, which commissioned the report, said: “The figures indicate that 2008 is going to be a tough year for consumers.”

Housing, fuel and power costs have increased by 3.5 per cent, and some homeowners are expecting even higher energy bills. Next week Scottish and Southern Energy will introduce double-digit price increases for gas and electricity.

About 1.4 million people will come to the end of a fixed-rate mortgage this year and face higher repayments. Not only are interest rates higher than they were two years ago, but lenders are increasing rates to protect their margins.

Times Recommends

• Model judge and his funky new gown
• First review: Sex and the City
• Thatchers clutch at straws after crops fail