Home Retail, Britain’s biggest household goods retailer, urged the government to take steps in its budget next week to boost the incomes of lower and middle earners as it forecast a fifth consecutive year of falling profits. The owner of catalogue-based Argos stores and the Homebase do-it-yourself chain said on Thursday there were reasons to be more optimistic about the retail outlook for the coming year, with inflation falling and events such as the Olympic Games in London and the Queen’s diamond jubilee likely to boost spending. However, it said it was planning cautiously after a big drop in sales at both Argos and Homebase in the 8 weeks to Feb.25. “What we totally agree with is the increase in the personal allowance,” chief executive Terry Duddy told reporters, referring to proposals by Britain’s coalition government to raise the threshold at which people start paying income tax. “We think that’s an important factor and would lead to an easing for the circumstances that people have got where they’ve just seen disposable income falling.” Britain’s retailers are mostly struggling as disposable incomes have been squeezed by rising prices, muted wages growth and austerity measures, and shoppers fret about rising unemployment, a shaky housing market and the euro debt crisis. Argos has been particularly hard hit because its mainly low-income customers have suffered most and because it also faces stiff competition from grocers, specialists and the internet. Sales at Argos stores open over a year dropped 8.5 per cent in the eight weeks to Feb.25, broadly in line with a drop of 8.9 per cent over the 52 weeks ending on the same date. Duddy said shoppers were particularly cutting back spending on electrical goods like televisions and video games, with sales of the latter down 35 per cent in the eight-week period. Like-for-like sales at Homebase, Britain’s No.2 home improvements retailer behind Kingfisher’s B&Q, slumped 6.5 per cent in the quarter, worse than the full-year decline of 2 per cent as sales of furniture, kitchens and bathrooms suffered. The firm said it was on track to meet analysts’ expectations for a full-year underlying profit of around 100 million pounds, which would be down sharply from 254 million the year before.