Lowest incomes set to fall by 15%

The study, branded a "powerful wake-up call," said that incomes for the lowest groups are set to fall by up to 15 per cent in the next eight years even if the economy as a whole returns to growth.

Research for think tank Resolution Foundation by the Institute for Employment Research and Institute for Fiscal Studies looked at the changing jobs market structure and effects of Tory changes to the tax and benefits system.

It found that a low-income household which had a net income of £10,600 a year in 2008 would earn the equivalent of just £9,000 a year by 2020.

A middle-income household which had a net income of £23,000 in 2008 would bring in £22,200 by 2020 - a real-terms decline of 3 per cent.

The real worry was that their calculations assumed that GDP, a measure of the size of the economy, would recover steadily and then grow at 2.5 per cent from 2015.

Resolution Foundation chief executive Gavin Kelly said: "This is a powerful wake-up call.

"It suggests that millions of families will struggle, to an extent we have not seen in other periods of growth.

"It's particularly sobering that this outlook is based on optimistic assumptions about growth in the economy with a steadily rising number of people in employment."