Chris Proud and his wife Lorraine should be sitting pretty. The 41-year-olds have a combined income of more than £100,000. He is an accountant and she is a chef who runs her own business catering for executive events and weddings.

They live in an £800,000 detached four-bedroom home in West Sussex with their son William, 12, and nine-year-old daughter Emily. Like many other families, however, they are feeling the squeeze. Their cost of living is rising sharply and they are having to cut back.

“Both our children go to private school and the fees have risen above inflation for the past 10 years,” said Chris. Rising gas and electricity bills, the January hike in train fares, higher council tax and increases in other taxes are adding to the pressure on the family finances. The couple have a fixed-rate mortgage but are not looking forward to the time when it has to be renewed.

“Now we go on only one holiday a year rather than two. My wife is is having to do more functions to keep the balance. We are just having to be a bit more careful and forgo certain things such as fixing things around the house and around the garden. Car insurance has gone up and when my wife is working in London she has to pay the congestion charge.”

The Prouds are not alone in feeling under pressure from the rising cost of living. The big squeeze is being felt by middle-class families across Britain. Figures last week showed inflation on the government’s preferred consumer prices index (CPI) measure jumping to an 11- year high of 3%. But the CPI does not include the cost of housing or council tax.

On a more familiar measure, the retail prices index, inflation is at a 15-year high of 4.4%.

For many families, however, even this does not tell the full story. Last week the Office for National Statistics launched its personal inflation calculator, allowing people to work out their personal inflation rates for the first time. Traditionally pensioners have come off worst when it comes to price rises, particularly when essentials such as heating are rising in price. But the calculator showed high inflation rates, of well above 4.4%, for many middle-class families. In December, for instance, furniture prices recorded their single biggest rise since records began in 1947.

The squeeze is real. When incomes are rising faster than prices, household finances are in good shape and pundits talk about the “feelgood” factor. But in Britain today a “feelbad factor” is fast creeping in.

Official figures show that average earnings, even including bonuses, are rising by 4.1%. This is the first time prices have outstripped pay in more than a decade. The Bank of England has given notice that if wages and salaries move significantly higher, it will not hesitate to act by pushing interest rates up further still.

Other government figures just out confirm the extent of the squeeze. The latest expenditure and food survey showed that household disposable incomes — after tax deductions — fell to an average of £500 a week in 2005-06, from £502 in 2004-05. This was the second fall in the space of three years, mainly as a result of the rising tax burden. The growth in after-tax incomes has been glacial for the past five years.

Apart from tax, the cost of “essentials”, has risen sharply; gas bills are up by more than 70% in the past three years while electricity is up 25% in the past year alone. In contrast with Europe, where prices have barely risen, British consumers have been bearing the brunt.

Last year Ernst & Young, the accountants, calculated that people’s “discretionary” income — the amount left over after tax and essential spending is deducted — had dropped to its lowest level for five years, and was 10% down on its 2002-03 level. Significantly, this was before the Bank of England started to raise interest rates last summer.

FOR many middle-class families, it is the rising cost of educating children that hurts most. Douglas Johnstone, 54, has just sold a successful financial services firm and along with his wife Margaret, 54, a primary school teacher, still enjoys an annual household income of almost £90,000. However, they are unable to move from their £300,000 detached home in Devon to a bigger property because of rising house prices and increased stamp duty.

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