Take-home pay this year is expected to fail to keep pace with the rise in the cost of living, a comprehensive pre-Budget survey suggests today.

British workers will be taking home an extra £44 a month on average after this year’s pay rises, but families are facing an increase of £148 a month in essential living costs, it says.

It adds that, with many employees receiving rises below the retail price index, only groups such as company executives, financial advisers and lawyers stand to enjoy net gains.

Based on figures compiled from the responses of more than 4,000 people, the survey – by uSwitch.com, the independent price comparison service - suggested that the average pay rise in Britain this year would be 3.4 per cent, compared with a 9 per cent rise in household bills.

It claims that the nation’s households will be £21 billion out of pocket. Such is the low level of consumer confidence that a large number of workers believe they face a pay freeze.

The average net monthly increase in salaries from 2007 to 2008 was £61 for the private sector, £31 for the public sector and £44 overall.

The figures show the growing gap between the private and public sectors. The private sector expects to have an average pay rise of 4.2 per cent (£1,089 gross) compared with 2.5 per cent for the public sector (£558 gross).

The survey found that 78 per cent of expected pay increases in the public sector and 53 per cent of pay increases in the private sector were below the national average.

Worst hit were the police (2.05 per cent), nurses (2.09 per cent), civil servants (2.13 per cent) and teachers (2.32 per cent). Their average wage increase of 2.2 per cent is significantly less than the British average of 3.4 per cent.

While the average net salary increase in 2008 is expected to be only £44 a month, above-inflation increases on items such as fuel, energy, food and mortgages will drive monthly household expenditure up by £148.

Drivers using unleaded petrol will be worst hit, with costs increasing by £192 this year, a rise of 18 per cent in just 12 months.

The series of price rises announced by the energy companies has pushed the average dual fuel bill up by 13 per cent, adding a further £114 a year to energy bills.

Grocery prices are rising fast. Increases in the cost of basic food items will result in shopping bills rising by a huge £324 a year, up 11 per cent since 2007.

Wheat prices rose by their highest amount in a single day last week, contributing to a 28 per cent rise in the price of bread since 2003. It could also have repercussions on the cost of other everyday food purchases, such as ready meals, crisps, eggs, milk and meat.

In addition, the drinks industry recently announced that the average cost of a pint of beer was set to hit £4. It blamed an “unprecedented” rise in distribution and production costs along with an increase in the cost of barley and hops.

According to Nationwide, mortgages are also on the increase. It says that average house prices have increased by 3 per cent from £174,706 to £179,358 since the start of the year and the average two-year fixed mortgage rate has increased from 5.23 per cent to 5.85 per cent.

This means that the average monthly mortgage repayment has risen from £940 to £1,025, an increase of £85 a month or £1,020 a year. Council tax bills will also go up by 4.5 per cent on average – a Band D property will cost an extra £59 a year.

Two of the few items creating a downward pressure are clothing and footwear, with prices falling faster in this year’s January sales compared with 2007. Ann Robinson, director of consumer policy at uSwitch.com, said: “This is crunch time for UK households as we face up to a downturn in the economy, the news of below-inflation pay rises and the reality of having less money in our pockets.

“We are working harder, but are certainly not getting any wealthier. Hikes in taxes, the cost of food, utility bills and social contributions over the past decade have outpaced the overall rise in income levels, to push disposable incomes in the UK to their lowest level in over a decade.”

Alec Chrystal, head of the finance faculty at Cass Business School, said: “Rising costs paired with the impact of slow wage increases will certainly lead to less disposeable income for many consumers and this will make them feel worse off.

“The likely squeeze on household incomes this year will have a significant impact on consumer confidence.”

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