Families 'past the worst" of squeeze on their finances Incomes will slowly start to rise again despite higher taxes and benefit cuts due to take effect this year that will eventually cost an average of £370 per family, the Institute for Fiscal Studies suggested yesterday. Expected falls in inflation could mean that the bulk of the pain may be behind them, said Robert Joyce, an economist at the think tank. But any overall recovery in family finances would be "sluggish." The income of the median British household has fallen by 6.4 per cent over the past two years, the IFS calculated. Part of that squeeze has been caused by the Coalition's austerity policies. But, especially for those on higher salaries, the pain has mostly been due to prices rising much more quickly than wages. Inflation on the consumer prices index measure peaked at 5.2 per cent last September, and had fallen back to 3.6 per cent by last month. The Bank of England forecasts that it will be below 2 per cent by the end of next year. If the forecasts prove accurate, "the gap between inflation and earnings growth will close and most of the real-terms fall in median income has now occurred," the IFS said. Real household incomes would then fall slightly during 2012-13, be "roughly flat" the following year and return to growth from 2014-15. With a general election due in May 2015, that prospect could prove politically significant. But the median household's income would still be lower in real terms than in 2002-03. Lower-income households and those with children would bear a disproportionate share of the pain from changes to tax and welfare, the IFS said. Reforms planned for 2012-13 amount to a net "takeaway" of about £4.1 billion - an average of £160 per household. The following year, the cost rises to about £9.8 billion. There was "no realistic chance" of the Government meeting its own targets for reducing child poverty rates, Mr Joyce said. A Labour spokesman said that the analysis painted a "damning" picture of the Coalition's economic policies and showed ministers favouring the well-off over the poor.