Poorer families are likely to be the biggest losers over the UK's economic problems, according to a respected think tank.

The Institute for Fiscal Studies (IFS) found that since the financial crash, the richest in society had seen their income squeezed the most.

But at the other end of the scale, the poorest have been harder hit by the impact of inflation.

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In its new report, the IFS predicts that as the economy improves those at the bottom will be the last to see their living standards recover.

It also warned that living standards have failed "dramatically" and are unlikely to return to pre-crash levels by next year's general election,

Labour and the Conservatives have been at war for weeks following claims from the Coalition Government that take-home pay had risen in real terms last year.

Labour Treasury spokeswoman Catherine McKinnell last night said that the figures were "worrying" and showed that those on lower incomes had been hardest hit by price rises, particularly food and energy bills.

"Working people are worse off under the Tories," she said.

The IFS found all income groups had seen a drop in living standards.

Those at the top saw their incomes fall by almost 9% between 2007-08 and 2013-14, while middle incomes fell 6% and the poorest off 2.4%.But poorer families, who spend a higher proportion of their incomes on food and fuel, have suffered more as a result of inflation.

Between 2008 and 2013, energy prices rose by 60% while food was up 30% - with a 20% price increase overall.

Those on low incomes were also less likely to have benefited from historically low mortgage rates, which largely helped the better off.

TUC general secretary Frances O'Grady said: "Last year's recovery failed to improve people's earnings and unless things change, workers across Britain face a decade of pay stagnation."