The government’s plans to rescue Britain from the Covid crisis will fail to end a decade-long squeeze on wages, leaving average pay packets by the middle of the decade £1,200-a-year below the level forecast before the virus outbreak, a leading thinktank has said. The Resolution Foundation said the combined effects of weaker pay growth and higher unemployment will prolong Britain’s living standards squeeze, despite the extra spending by the Treasury. Household incomes are on course to grow by just 10% in the 15 years since the start of the financial crisis in 2008, compared with the 40% growth seen in the 15 years up to the crisis, it said. The report comes as Rishi Sunak faces mounting criticism for implementing £10bn of cuts across many Whitehall departments next year, well before the economy is scheduled to climb back to health, rising to £13bn by 2025. Sunak also refused to say he would maintain universal credit levels that he raised earlier this year beyond next April. The Resolution Foundation said around 6m of the poorest households will lose over £1,000 “just when unemployment is at its highest”. The report Here Today, Gone Tomorrow also warns that the Treasury’s move to take back control of “levelling up” meant reinforcing the existing highly centralised system of small grant funding. “It means that the well intentioned new Levelling Up Fund risks being bogged down in politics, rather than swiftly getting investment into communities,” the report said. Torsten Bell, chief executive of the Resolution Foundation, said: “The Covid crisis is causing immense damage to the public finances, and permanent damage to family finances too, with pay packets on track to be £1,200 a year lower than pre-pandemic expectations. “The pandemic is just the latest of three ‘once in a lifetime’ economic shocks the UK experienced in a little over a decade, following the financial crisis and Brexit. The result is an unprecedented 15-year living standards squeeze. “Yesterday, the chancellor chose to ramp up his Covid spending to £335bn. But he also quietly dialled down his spending plans beyond the crisis. For all the talk of ending austerity, its legacy will continue for many public services throughout the parliament. “While the priority now is to support the economy, the permanent damage to the public finances mean taxes will rise in future. But which taxes those will be, like which Brexit we can expect, are questions the chancellor left for another day.”