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Britain’s middle and high income households are on course to face the worst hit to living standards since the 1960s under the Conservatives, the Institute of Fiscal Studies (IFS) has warned.
The think tank’s analysis of official data showed that incomes of middle and high-earning families were around 1.6pc lower in 2022-23 than in 2019-20.
By the end of this parliament, they are on course to have experienced the largest setback to living standards since records began in 1961.
It means that since the last election, the Government will have presided over record tax rises and a record decline in the standard of living, the IFS said.
Incomes for the poorest third of households in Britain have suffered a 0.1pc fall over the same time, one of the worst on record.
As a result of the slump in living standards, inequality has decreased in the four years to 2022-2023, but the IFS said this was only the case because incomes “performed very poorly” across all income levels.
Middle and high-income families have been left worse off by frozen tax brackets and high inflation, the analysis showed.
Lower-income households have also been badly hit by soaring living costs but were partially sheltered by targeted government support such as cost of living payments.
However, the IFS highlighted that the data fails to capture “the true increase in deprivation” during the cost of living crisis, as millions more struggle to afford food and heating.
Over the four years captured, the number of people facing food insecurity has risen by more than two million to 7.3m.
Meanwhile, some 4.3m more people cannot heat their homes properly, bringing the total to 7.2m.
The figures also show that among renters who have had to absorb record rent increases after the pandemic, some 200,000 more people have fallen into absolute poverty.
This means they fall under a certain income level after housing costs. For a childless couple, the tipping point is having less than £15,600 to live on in a year.
Sam Ray-Chaudhuri, an economist at IFS, and author of the report, said: “The cost-of-living crisis has seen alarming rises in the share of households facing food insecurity, or unable to adequately heat their home. With further poor income growth forecast, and an unenviable fiscal position, bringing about a substantial improvement in living standards will be a significant challenge for the next government.”
A Treasury spokesman said: “The last few years have not been easy” but said the economy had “now turned a corner”.
He added: “We are in a new economic moment, and it is important we stick to the plan to grow the economy so we can deliver a brighter future for Britain and improve opportunity for everyone.”