WORKERS face the worst decade of pay growth since the Napoleonic wars and a "completely unprecedented" 15 years without a pay rise, two highly-respected economic think tanks have warned.

Cuts due to come in next month will also see tens of thousands of three and four-child families in Scotland lose out on between £2,500 and £7,000 a year.

The warnings came as the Chancellor Philip Hammond faced increasing pressure to scrap a planned tax raid on 2.5 million of the self-employed.

Loading article content

In an highly unusual step a Conservative minister even called on his own government to apologise for the move, which breaks a general election manifesto pledge.

The Resolution Foundation has calculated that real average earnings are set to return to their 2007 peak only in 2022.

Overall average earnings will be £12,000 lower by 2020 than they would have been if pre-crisis trends had continued.

A combination of pay stagnation and benefit changes means the five years to 2021 are on course to be economically worse than the four years following the financial crisis for the poorest third of households.

The date for balancing the UK's books has also been pushed back until 2025.

Torsten Bell, the director of the think tank, said: "The big picture from the Budget is that the big squeezes on both the public and family finances have been prolonged well into the 2020s."

He added that this decade was "now set to be the worst for pay growth since the Napoleonic wars".

That analysis was backed up by the Institute for Fiscal Studies (IFS), which warned that families would-be hard hit by a series of announcements in George Osborne’s final Budget last year.

The so-called ‘two-child’ policy in payments of tax credits and universal credit mean that in the long run 600,000 three-child families across the UK will be an average of £2,500 a year worse off than they would have been, while 300,000 families with four or more children will be an average of £7,000 a year worse off.

However, both the IFS and the Resolution Foundation backed the £2 billion National Insurance hike for the self-employed.

They suggested that the measure was a sensible way to deal with the fact that those who work for themselves have recently been given better state pension rights.

But Wales minister and Tory whip Guto Bebb told the Welsh language station BBC Radio Cymru: "I believe we should apologise. I will apologise to every voter in Wales that read the Conservative manifesto in the 2015 election."

That manifesto specifically ruled out any rise in National Insurance contributions.

Mr Hammond attempted to defend the move, saying that he wanted to had to get the UK “match fit” ahead of exit talks with the European Union.

But a former Tory leader Iain Duncan Smith urged him to “reflect" on the policy, Westminster code for scrap it.

And other Tory MPs suggested that they might try to amend the Budget to prevent the measure.

Conservative MPs are furious at what some have described as a “tax on the strivers”.

They complain that the reforms will punish aspiration and hit ‘white van men’ as much as rich lawyers.

A spokesman for the Prime Minister turned down four opportunities to confirm that the changes would happen, fuelling speculation that minsters were preparing for a climbdown.

Meanwhile, Labour called on the Scottish Tory leader Ruth Davidson to “break her silence” on the broken tax pledge.

Figures published by Labour showed that over the last decade self-employment in Scotland has increased by 18 percent, to 310,000 .

Scottish Labour Westminster spokesperson Ian Murray said: "These numbers will have Tory MSPs worried . Ruth Davidson has been posted missing on these plans to increase taxes on working people all across Scotland. Ruth Davidson used to speak out against raising taxes , now she has taken a vow of silence.”

Scottish National Party economy spokesman Stewart Hosie described the NIC hike as "a tax on ambition".

"It is utter hypocrisy from the Tories and will hit many hard-working businesses across Scotland," said Mr Hosie.