HOUSEHOLD energy prices have gone up by eight times as much as the average increase in earnings over the last three years, according to a new report which calls for government levies on bills to be scrapped.

Citizens Advice has calculated that the so-called Big Six gas and electricity suppliers have raised prices by 36% since October 2010, with average earnings going up by only 4.4% over the same period.

Citizens Advice chief executive Gillian Guy is warning families will reach crisis point this winter as they struggle to heat their homes. Scotland's two major suppliers, SSE and ScottishPower, both announced price increases of more than 8% last month, affecting nearly 10 million households on both sides of the border.

"Enormous escalations in energy prices are creating a desperate situation in many households," Ms Guy said.

"People find they do not have enough money coming in to pay for everyday essentials, as increases in daily costs are outstripping low rises in earnings."

"As we head into winter, and the latest price rises begin to kick in, more and more people are likely to reach crisis point as they struggle to heat their homes and feed their families."

Energy suppliers claim state levies to fund energy efficiency measures are a large part of the reason for increasing prices for customers. A change in the policy is widely expected to be announced in Chancellor George Osborne's autumn statement next month.

Citizens Advice says its bureaux are seeing many people on the brink of financial despair, with parents often forced to choose between heating, clothing or feeding their families.

Calls to its consumer service about energy issues have surged since the first price increase was announced in October.

Ms Guy added: "Levies are adding an unfair financial burden to poorer households. Paying for these costs through taxation would be a much fairer approach and would avoid low-income households funding the very support that is supposed to help them."

SSE, ranked second of the big six utilities, raised gas and electricity prices for its 7.8 million customers in Scotland and northern England by 8.2% in October.

Another 2.2 million households in Scotland also face higher energy bills after ScottishPower announced it will raise gas tariffs by 8.5% and electricity prices by 9% on average from December 6, adding another £113 to the typical annual dual-fuel bill.

Concerns about energy prices coincide with a new report which says that household finances have this month seen their biggest setback since April despite signs of improvement in the economy.

Around 7% of families saw their finances improve, but four times as many (29%) saw their finances get worse, according to financial information firm Markit.

In worrying signs for the high street as Christmas approaches, the survey indicated the weakest consumer appetite for major purchases recorded so far this year.

Tim Moore, senior economist at Markit, suggested the price hikes announced by energy companies had dampened household's expectations.

More than 600 out of 1500 households surveyed across Britain predict their finances will have deteriorated by this time next year, with a quarter expecting an improvement.

The survey also recorded the most marked drop in savings seen so far this year as households reported a tighter squeeze on the amount of cash they had available to spend.

Mr Moore said the latest survey was "a timely reminder that bumper spending levels over the festive season are not yet baked in the cake".