The average family will be £910 worse off this year as they face the biggest peace-time squeeze on their finances since 1921, according to a report.

Rising household bills mean spending power will be significantly less than two years ago, the Centre for Economic and Business Research said.

The consultancy estimates that disposable incomes will fall 2% in 2011, following a 0.8% drop in 2010.

Only the two world wars had bigger impacts on spending, the CEBR said.

The organisation forecasts that inflation will average 3.9% in 2011 – its highest since 1992 – as January’s hike in VAT to 20% from 17.5% and the rising cost of oil and other commodities continue to drive up prices.

Pay packets, on the other hand, will rise just 1.9% as unemployment remains high and the full extent of public sector cuts kick in.

http://www.bbc.co.uk/news/business-13029870