Rises in the cost of living and higher tax burdens have wiped out pay rises and left the average family £8 a week worse off compared to last year, according to research.

Supermarket group Asda said despite average earnings rising by £23 a week during the past 12 months, the typical family has 6% less disposable income after meeting all their essential outgoings.

The latest figures come as research for Combined Insurance showed that consumers have seen their monthly outgoings soar by 26% during the past two years driven by higher housing and energy costs.

The Asda research, which was carried out by the centre for economics and business research, found that the average family has an income of £633 a week, 3.6% more than in May 2007.

But the amount of tax and National Insurance people now pay has soared by 6.5% during the same period to £129 a week, leaving people with take-home pay of £533, just 2.9% more than a year earlier.

At the same time, the average cost of essential goods, such as spending on food, clothes, housing, utility bills and transport, has risen by 6.2% or £24 a week during the past 12 months, to £402, leaving people with just £131 disposable income.

The rise in spending on essentials has been driven by a 7.9% jump in food prices, while the average family now spends 6.4% more on utility bills than a year ago.

Transport costs have also risen steeply, increasing by 6.2%, with the cost of petrol soaring by 19.5% during the past year.

The report said that while consumer price inflation hit its highest level in 16 years at 3.3% in May, just looking at essential spending for the average UK family, showed the cost of living rose by 3.7%.

It said: "The prices of important essentials such as food, gas, electricity and transport have all risen considerably over the last year - with inflation for all these categories in excess of 6%."

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