The UK is suffering the weakest growth in living standards in at least six decades and poorer families are faring the worst, according to a leading think tank.
In a new report on living standards, leaders at the Institute for Fiscal Studies (IFS) said that weak earnings growth, changes to taxes and benefit reforms would spark a rise in inequality by 2021-22.
And they have said incomes for the average family will not grow at all over the next two years.
The IFS has calculated that average household incomes will be 18 per cent lower in 2021-22 than would have been expected in 2007-08, when the global financial crisis hit.
This means a childless couple would be about £5,900 a year worse off than they might otherwise have been, rising to £8,300 for a couple with two young children.
The IFS has described the trend as the most sustained slowdown in income growth since comparable records began in 1961.
Campbell Robb, chief executive of the Joseph Rowntree Foundation, which funded the IFS report, urged the chancellor Philip Hammond to announce measures to support struggling families in next week’s budget.
He said: “These troubling forecasts show millions of families across the country are teetering on a precipice, with 400,000 pensioners and over one million more children likely to fall into poverty and suffer the very real and awful consequences that brings if things do not change.
“One of the biggest drivers of the rise in child poverty is policy choices, which is why it is essential that the prime minister and chancellor use the upcoming budget to put in place measures to stop this happening. An excellent start would be to ensure families can keep more of their earnings under the universal credit.”
A spokesman for the Treasury said: “We are taking action to support families with the costs of living by cutting taxes for millions of working people, doubling free childcare for nearly 400,000 working parents and introducing the “national living wage” – a significant pay rise for the lowest earners. More people are now in work than ever before with living standards also forecast to rise over this parliament.”