Annual income set to fall by £2,000

The average family will face an average annual income drop of £2,000 by the year 2013

Household spending power will fall by 7 per cent in real terms between 2012 and 2013, according to the Institute for Fiscal Studiesmeaning. As a result, an average couple with two children will be over £2,000 worse off.

The report suggests it will take until at least 2015 before the typical household recovers to the levels of 2009, and revealed that one in four children will be living below official poverty lines in ten years time.

Labour's shadow work and pensions secretary, Liam Byrne, says: 'David Cameron promised us he would not increase child poverty. Now we have the truth.

'The Tory-led Government's decision to cut too far too fast this year will condemn hundreds of thousands more children to grow up poor,' he says.

'All the progress our country has made in a decade fighting the scar of child poverty has been wiped out by the decisions of just one year.'

Bob Reitemeier of the Children's Society warns: 'Children in households where income has fallen are at greater risk of suffering from mental health issues and behavioural problems.'

But the IFS insist the Universal Credit, due to be introduced from 2013, will reduce child poverty.

'It will make work pay for the first time, tackling in-work poverty, and lift over one million people including 450,000 children out of poverty,' says a Department for Work and Pensions spokesperson.

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