Forecasts from the Institute for Fiscal Studies suggest by 2021 families will be £5,000 worse off than would have been expected at the time of the financial crisis a decade ago.
In five years’ time, family incomes will be just four per cent higher, the slowest rate of growth in more than 60 years.
Government critics will seize on the IFS’s findings that child poverty will rise over the next five years and this is “entirely explained” by the impact of planned cuts to benefits.
In a further blow to Theresa May’s pledge to make Britain “a country that works for everyone”, inequality is set to grow over the next five years.
However, pensioner poverty is expected to continue to fall giving Chancellor Philip Hammond scope to abandon the state pension triple lock after the next General Election.
Campbell Robb, chief executive of the York-based Joseph Rowntree Foundation, 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.”
The Treasury stressed it was taking measures to raise incomes and said the IFS analysis did not take into account the benefit from public spending on education or skills or the full impact of all tax changes.
A Treasury spokesman 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.”