According to The Institute For Fiscal Studies, UK households could face a large drop in income. This would return the average household income to the same level as 30 years ago.

Whilst take-home pay has increased during the recession the average income could see a drop of 3% for 2010 – 2011.

FS research economist Wenchao Jin said: “The figures tell a story of pain delayed, but not pain avoided.”

“Average living standards rose over the recent recession, likely to be driven by large increases in benefits and tax credit rates.”

“However, this type of growth cannot be sustained in the long term, and the outlook for incomes in 2010-11 is considerably bleaker, with the long-term effects of the recession on living standards delayed rather than avoided.”