The pressure on household finances is expected to continue in the coming years.
The OBR forecasts that real household incomes will fall in the near term, while real earnings, which account for inflation, will not grow in either 2027 or 2028.
Real wage growth is expected to recover to just 0.5 per cent by 2030 as businesses focus on rebuilding their profit margins.
Mr Miles said: “It’s been a dismal period in British economic history,” identifying soaring energy costs as a major factor behind the weak outlook.
Higher taxes are adding to the squeeze. The OBR expects the tax burden to reach a post-war record of 38.6 per cent of GDP, up from 33 per cent before the pandemic.
That increase is equivalent to an additional tax burden of approximately £180billion in today’s money.
One of the main factors is the continued freeze on income tax thresholds. The policy was introduced by Rishi Sunak in 2021, extended by Sir Jeremy Hunt and has now been prolonged further by Labour.
The standard Personal Allowance is set to remain at £12,570. The OBR estimates it would have reached £18,320 by 2031 if it had increased in line with inflation.
