The chancellor says she “rejects” new analysis that suggests the average family could be £1,400 a year worse off by the end of the decade.

Rachel Reeves told Sky’s Sunday Morning With Trevor Phillips programme that living standards will “increase during the course of this parliament”.

She insisted there has already been a “sustained increase” since Labour came to power last year.

The analysis, by the Joseph Rowntree Foundation (JRF), says frozen tax thresholds, rising mortgage and rent costs, and falling real earnings are all predicted to take their toll on living standards in Britain.

For the poorest third, living standards are forecast to drop twice as much compared with middle and high earners.

The charity believes the government will miss one of its stated “milestones” – to raise living standards across the UK before the next election.

It says the £1,400 drop by April 2030 means a 3% fall in disposable income for the average family, while the lowest income households will be £900 per year worse off – a 6% fall.

The situation could be even bleaker for some, as the analysis doesn’t account for the recently announced £5bn in cuts to disability benefits.

Average earnings are also set to fall by £700 per year by 2030, according to the JRF.

The charity – which conducts research into reducing poverty – says it came up with its prediction by modelling forecasts from the Bank of England and others.

Chancellor ‘confident we will see living standards increase’

Asked by Trevor Phillips for her response to the findings, the chancellor said she “rejects” them.

Ms Reeves argued living standards in the last parliament “were the worst ever on record”, and said the independent Office for Budget Responsibility (OBR) said in October they are expected to increase, while wages are currently rising at twice the rate of inflation.

“I’m confident that we will see living standards increase during the course of this parliament,” the chancellor insisted, adding there has been a “sustained increase” since Labour was elected.

“We’ve got to do more, absolutely, in terms of raising living standards. But this government has already got started in delivering our plan for change.”

But the JRF says the government welfare cuts are “wrong” and counterproductive and wants the plan scrapped.

It also urges a new “minimum floor” for Universal Credit to help address hardship, and believes the government should instead raise cash by increasing tax on wealth and investments.

The analysis comes three days before the chancellor’s spring statement in which more cuts are set to be announced in a bid to improve the country’s finances.

Some £2bn in cuts to the civil service are expected – but Ms Reeves says they will not affect front line services.

She has also confirmed to The Sun On Sunday that she won’t be announcing any new tax rises.

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Her speech will be in response to the OBR, which on the same day will publish its own forecasts on the economy, the cost of living and government finances.

Growth is Labour’s top priority, but the Bank of England recently halved its growth outlook for the UK economy this year to 0.75%.

There are also worries next month’s hike to employer national insurance and the minimum wage will create further drag on investment.