Britons saw their basic pay fall at the fastest pace on record in April due to soaring prices and more pain is in store for UK households as inflation is set to hit further eye-watering peaks later this year.

The Office for National Statistics (ONS) said regular wages excluding bonuses plunged by 4.5% in April when taking Consumer Prices Index (CPI) inflation into account – the biggest fall since records began in January 2001.

The data showed that, average regular earnings rose 4.2% in the three months to April, and raced 6.8% higher with bonuses included, but still failed to keep up with rocketing levels of inflation.

Here we look at what is behind the record fall in real pay and what the outlook is like for battered household finances.

– If wages are still rising, why is pay lagging so far behind inflation?

Big increases in pay are still not proving enough to offset the steep hikes in the cost of living. April’s drop in real wages comes off the back of the surge in inflation that month as the new energy price cap came into effect.

Inflation jumped to a 40-year high of 9% in April after regulator Ofgem hiked the energy cap by 54% for the average household at the start of the month. And the bad news keeps coming for household finances, as inflation is expected to sail past 10% in the autumn when the price cap is set to be increased again.

– Why is public sector pay more affected than the private sector?

The latest figures show that average total pay was up just 1.5% in the public sector in the three months to April, whereas wages leapt 8% higher in the private sector as the cost-of-living crisis saw the gulf between the two widen further.

Employees in the private sector are able to demand big bonus handouts to help them offset the cost crunch, but this is not something public sector workers are able to command.

– What is the Government doing to help ease the pressure on wages?

The Government recently launched a further £21 billion support package for households to help tackle the mounting cost-of-living crisis, including a £400 discount on gas and electricity bills for every home.

In terms of direct help on wages for those on the lowest incomes, it has raised the National Living Wage to £9.18 an hour for workers aged 21-22, £9.50 for the over-23s and £4.81 for apprentices.

But there are calls for more to be done and public sector workers are becoming increasingly disgruntled at their drop in real pay.

– Can the Bank of England help?

The Bank has been flagging concerns over a so-called wage-price spiral in the UK as firms have been hiking pay across sectors and nationwide in response to hiring shortages and as employees begin to demand more pay in the face of surging inflation.

It has increased interest rates from 0.1% to 1% since last December to help tackle inflation, while controversially Bank governor Andrew Bailey urged workers not to demand pay rises to help keep a lid on costs, which saw him come under heavy fire.

– Where will wages go from here?

Experts believe the jobs market will start to falter as the cost crisis sees consumers cut their spending, with the Bank forecasting a rise in the unemployment rate to around 5.5% on the horizon.

It is expected that, facing steep price rises themselves and weaker trading, firms will be forced to slow hiring and rein in pay rises for staff.