As up to 2 million public-sector workers took to streets across Britain to protest against pension changes, a leading think tank warned that families will be worse off in 2016 than they were 14 years earlier as they cope with more than a decade of austerity.
High inflation, cuts and the longest period of wage stagnation on record would cause the spending power of the average British family to plummet over the next five years, the Institute for Fiscal Studies warned.
Its analysis predicted that average incomes, adjusted for inflation, will fall by 3 per cent this year and further in 2012.
Institute director Paul Johnson said: ''In the period 2009-10 to 2012-13, real median household incomes will drop by a whopping 7.4 per cent - a record matched only by the falls seen between 1974 and 1977.''
The institute confirmed that lower-income groups would bear the brunt of the government's latest cuts, outlined by the Chancellor of the Exchequer, George Osborne, on Tuesday. Mr Osborne's statement signaled two more years of austerity than originally planned in his March budget, bringing the total to six.
Anti-poverty campaigners said the institute's figures showed the coalition government had shifted the burden of paying for Britain's deficit onto the most vulnerable.
The head of the charity Child Poverty Action Group, Alison Garnham, said: ''It is particularly perverse to reduce incomes of the lowest-paid working families by reducing tax credits when this is the group the government claims it wants to help through improved work incentives.''
The public-sector strike shut thousands of schools, paralyzed local authorities and left hospitals with minimum staffing.
Unions called the walkout of up to 2 million the biggest in decades.
But the government contested the figures and Prime Minister David Cameron dismissed the action as a ''damp squib''.
London Metropolitan Police said the city's ambulance service had asked it for help to respond to emergency calls because of a staffing shortage.
But feared long delays at London's Heathrow Airport failed to materialize as most immigration officials turned up for work.
The Institute for Fiscal Studies' analysis of Britain's current economic woes, and the government's reaction to them, both suggest that real median household incomes - where higher wages and salaries are adjusted to account for higher prices - will be no higher in 2015 than they were in 2002.
The analysis also showed that the unemployed and pensioners living on state benefits would do better than working families, after benefits were linked to the 5.2 per cent rise in inflation.
Neil Clarke, a union organizer with Unite, a major public-sector union, said: ''The average public sector pension comes in at £3000 ($A4600) a year. Could you live on £3000 a year?''
Mr Johnson said: ''Failure to index some elements of tax credits, and the reversal of decisions to increase child tax credits in real terms, will leave some poorer families worse off and will lead to an increase in measured child poverty.''
Trade Union Congress general secretary Brendan Barber said there was an ''unprecedented crisis'' in living standards.
''You can't build a sustainable economic recovery on the back of people getting poorer,'' he said.
''Rather than further hammering consumer confidence with public-sector pay caps and cuts in working tax credits, the government needs to put greater emphasis on wage-led growth, starting with a fairer tax system where everyone - including the super-rich - pays their share.''