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

Key Points from the BBC:

1. Chancellor George Osborne has delivered the Budget in the House of Commons
2. Fuel duty to be cut by 1p and expected 4p rise cancelled – all paid for by a £2bn tax on oil companies
3. Further £600 increase in personal tax allowance from April 2012
4. Financial help for 10,000 first-time buyers to get on property ladder
5. Tobacco duty rates up by 2% above inflation from 28 March, and alcohol duty rises – 4p extra on a pint, 15p on a bottle of wine and 54p on a bottle of spirits
6. Forecast for how much UK economy will grow in 2011 downgraded

For live update on the Budget: http://www.bbc.co.uk/news/uk-politics-12759543

BBC news:

The UK Consumer Prices Index (CPI) annual inflation rate rose to 4% in January, up from 3.7% in December, as the effects of the VAT rise were felt.

Higher oil prices also meant inflation remained well above the 2% target.

Retail Prices Index (RPI) inflation – which includes mortgage interest payments – rose to 5.1% from 4.8%.

The CPI figure is the highest since November 2008, and will put pressure on the Bank of England to lift interest rates to curb accelerating inflation.

The CPI measure has now been one percentage point or more above target for 14 months.

Source: http://www.bbc.co.uk/news/business-12462901