“On top of that, taxes – in particular the unfair council tax – have risen in a way that are unrelated to people’s ability to pay.”

The report shows that in 2002, an average family had £16,554 in disposable income after tax and housing costs. Last year that dropped to £15,231 – a fall of £1,323.

The slide is partly the result of the average council tax bill rising from £1,069 to £1,321.

Meanwhile water, gas and electricity charges are up from £854 to £1,312 and other household running costs have increased from £1,332 to £1,648.

The total cost of supporting a family has soared from £130 a week in 2002 to £230 now. Increased tax has cut the amount of families’ disposable income from 71 per cent of total pay in 1997 to 67 per cent now.

Debts – mostly home loan payments – have also taken an ever bigger slice of earnings, with typical mortgage interest costs doubling from £75 a week in 1997 to £150 now. But while real wages grew by more than 15 per cent between 1997 and 2002, the annual increase slowed to virtually nothing in 2007 at 0.18 per cent.

“Average-earning households have been hit particularly hard,” said Charlie Elphicke, the report’s author. “Taxes have been increasing at a greater rate than earnings for some years.

“The combination of stagnating earnings, sharp increases in tax, excessive debt, rising effective interest rates and growing household running costs means that households are more vulnerable to, and less prepared for, any economic downturn.”

But a spokesman for the Treasury said: “The tax burden on a single-earner family with two children is now lower than in 1997, and lower than during the peaks seen in the early 1980s.

“As a result of personal tax and benefit measures introduced by the Government, households are, on average, £1,000 a year better off in real terms, and families with children are on average £1,550 a year better off in real terms compared to 1997.

“In addition, thanks to tax credits, four in 10 families now pay no net tax. What’s more, thanks to the strong economy and record employment, incomes have grown strongly across the population since 1997.

“With 2.6 million more people in employment and over twice the number of people earning over £30,000 £50,000 and £100,000, the trend of rising inequality, which reached its highest level during the 1980s, has been arrested.”

Meanwhile, Conservatives will vote against changes to capital gains tax, which are expected to cost small businesses as much as £700million.