Labour yesterday urged the Chancellor to use the Budget to “change course” as figures suggested households are set to lose £370 from tax and benefits changes.
Analysis by the respected Institute for Fiscal Studies (IFS) found measures already planned would hit incomes by an average of £160 in 2012-13 – rising to £370 a year in the future.
Families with children and the less well off will feel the biggest impact, with the former losing £530 on average, according to the think-tank.
However, brighter predictions for the wider economy should mean the falls in median income are lower than in the last two years.
The IFS released the summary of its analysis with coalition negotiations still ongoing over the Budget being delivered on March 21.
There is speculation that moves to strip child benefit from higher earners could be softened, while the tax threshold for earnings is expected to be raised towards £10,000.
However, Chancellor George Osborne has insisted the Government will not borrow more to fund any changes. The Liberal Democrats have been calling for revenue to be raised from levies on wealth.
Shadow Chief Treasury Secretary Rachel Reeves said: “This is a damning analysis of the choices this out of touch Government has made as they raise taxes and cut spending too far and too fast.
“How can we be all in this together when the banks have got a tax cut this year, while people on low and middle incomes are being hit hard and families with children hardest of all?
“Changes from next month will cost families with children an average of £530 per year on top of last year’s VAT rise. And as we have learned this week the Government’s changes to tax credits are perverse and unfair: thousands of couples with children will next month find themselves up to £73 per week worse off and better off if they quit work.”
She went on: “We need urgent action in the Budget on jobs and growth to boost our economy and so help get the deficit down, and on fairness so that families on low and middle incomes do not bear the heaviest burden. ”