Britons are richer, but have less to spend

Disposable income has plummeted to its lowest level for a decade in a further sign of the turmoil in the financial markets and the credit crunch hitting British consumers.

The soaring cost of utility bills plus rises in taxes and rent costs are behind the trend, according to the price comparison website uSwitch.com. An increase in the number of households living below 60 per cent of the average household income is another factor.

Net household income as a proportion of gross household income is down 5 per cent compared to 1997.

This means the proportion of money left to spend on non-essential items is lower than at any time during the past decade, uSwitch found.

Despite a rise in average household incomes since 1997, the amount of "disposable" income has dropped 2 per cent over the decade.

The website's personal finance specialist, Mike Naylor, said: "Our pay cheques may be getting fatter, but the chunk that we have to hand over to pay taxes, bills and other living costs is growing even faster. We are working harder, but we are not getting any wealthier. We are just running to stand still."

The cost of water, heating and rent bills have risen on average by 33 per cent, 46 per cent and 44 per cent respectively over the past decade, uSwitch said.

Housing costs still take the biggest chunk of household income after a 231 per cent average increase in house prices and a 44 per cent average increase in rents over the past decade.

Disposable income is defined as gross income minus taxes and essential living costs such as utility bills, food, transport, clothing, communication, TV licence fees, insurance and housing.