ONS: Millions are getting poorer

The Office for National Statistics (ONS) said that between 2007/8 and 2010/11, the average disposable income for non-retired households in the middle fifth of the income distribution fell by 3.8 per cent from £31,000 a year to £29,900.

The average fall was bigger before taxes and cash benefits were taken into account, dropping from £36,400 to £33,200.

The ONS's findings were contained in a report detailing the changes in average family incomes in Britain since 1977.

The report shows average disposable incomes rose 1.7 per cent a year between 1977 and 2011 while the proportion of gross income subject to direct taxes, such as income and local government taxes, declined to 19.2 per cent from 23.5 per cent.

TUC general secretary Frances O'Grady said: "These figures show the real cost of the UK's living standards crisis for middle Britain, with households thousands of pounds poorer today than five years ago.

"But rather than helping families, the government's real-terms cut in welfare support next month will make them ever poorer."

She added: "The Chancellor can start putting right this damage in his Budget on Wednesday by cutting VAT, which will save households hundreds of pounds a year. TUC research shows this is the most effective way to help low and middle-income households.

"Cutting VAT and reversing welfare cuts, rather than reducing corporation tax or raising the personal allowance again, would show that the Chancellor is prioritising the living standards of middle Britain over big business and rich households."