Families 'feeling tax squeeze'

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Average household taxes are up by £7,800 a year while increases in disposable income have stagnated, a Centre for Policy Studies report claims.

Shadow chancellor George Osborne said the report showed families were "feeling the squeeze" as a result of the Government's stealth taxes.

The report, Why Do We Feel So Broke, said until recently average families were able to absorb tax increases partly through rising salaries and greater levels of personal debt.

But since 2005 increases in disposable income after tax and housing costs have stalled or gone into reverse.

The report states that disposable income has gone down from 71% of gross income in 1997 to 67% today. Average earning families have been hit particularly hard with disposable income falling by £950 since 2002.

For "average households with average mortgages" the costs of running a home have increased at up to 10% a year.

Families have struggled to cope with sharp increases in mortgage interest payments and household bills leading to "excessive" levels of debt.

The report argued that "the Government's increases in taxation and the recent availability of easy credit is a potentially toxic mixture".

Mr Osborne said: "These new figures show how the cost of living has soared under Labour. Gordon Brown has heaped stealth taxes on to hard working families and now they are feeling the squeeze."