A report from the Centre for Policy Studies (CPS) has pointed out the fragility of family finances largely as a result of increasing tax and mortgage payments. They claim that disposable income (after taxes and housing costs) rose by 21% between 1997 and 2002, going up by £3,600 from £12,582 to £16,182; however, in the years since then, and partly due to the steadily rising burden of taxation, they report a fall of 6% to £15,231 – a reduction by £951.

The outlook offers no improvement according to the report, which claims an increase in taxation of £7,800 per household since 1997, to which the Institute for Fiscal Studies adds a projection of an additional £2,600 per year to be paid by taxpayers in five years time. This is said to leave household incomes very vulnerable to any economic slowdown when combined with the present circumstances of stagnant earnings and record debts, rising fuel costs and interest rates.

Economists have said that the quarter point reduction in the Bank of England base rate in February will have very little effect on these figures, especially where in some cases interest rates are moving in the opposite direction, although those striving to pay off debts will be glad of any help. Another direct cost increase which is likely to hit many home owners during this year is the number of fixed rate mortgage agreements which will terminate; the move onto new interest rates is unlikely to be a comfortable experience and will impact on disposable income levels, as well as increasing the incidence of repossessions.

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