British families are facing increasingly smaller disposable incomes, as bills and taxes grow faster than most incomes.

The average household is paying£7,800 a year more in taxes now than when labour came to power, according to the Centre for Policy Studies. It also says that rising mortgage interest and household bills have left many with “excessive debt”.

The report highlights some of the misery facing retailers, which have been hit by the slowdown in consumer spending. Disposable income has fallen from 71 per cent of gross income in 1997 to 67 per cent today.

Shadow chancellor George Osborne said that the report confirmed that families were “feeling the squeeze” as a result of stealth taxes.

However, the Government says that the tax bill for single-earner families with two children is lower than a decade ago, with tax credits allowing 40 per cent of families to pay no net tax.

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