Working families face a sustained budget squeeze as disposable income won't return to pre-pandemic levels for another two years.
Experts from the Office for Budget Responsibility (OBR) told MPs scrutinising Chancellor Rishi Sunak's "age of optimism" spending plans that, even after 2023, growth in households' income would be "pretty mediocre".
Sir Charlie Bean, economist with the forecaster, said Covid had hit the UK's already-sluggish productivity rate.
He added that rising inflation - which some predict could hit a staggering high of 5% next year - and tax hikes meant households would feel the pinch in the medium term.
"We don't have real household disposable income getting above pre-pandemic levels until the back end of 2023, and it's growing at a pretty mediocre rate from then on," he told the Commons' Treasury Select Committee.
The grim assessment came after the Resolution Foundation calculated that Brits will pay £3,000 more in tax on average by 2026 than when Boris Johnson took office.
Economists at the Institute for Fiscal Studies also took a bleak view of the Chancellor's plans, warning that higher food and energy bills meant workers will feel "real pain", despite Mr Sunak lifting the public sector pay freeze and raising the minimum wage to £9.50.
OBR experts also sounded the alarm over other looming crises.
Richard Hughes, chairman, told the committee there was a "permanent hole in the rail system", and the taxpayer may be forced to subsidise public transport "in perpetuity" to save services from the chop.
“We don’t know to what extent people are going to start returning to work five days a week," said Mr Hughes. "Revealed preference seems to suggest people are going to work from home more.”
He added: “Assumptions about when ticket revenues into the transport system recover to pre-pandemic levels I think have to be kept under constant review and it may be the case there is a permanent hole in the rail system, the Underground in London and local transport systems, which are going to have to be subsidised in perpetuity if they’re not going to cut services.”
Turning to the longer term, Mr Hughes told MPs Mr Sunak may struggle to meet his new targets of both reducing debt and balancing the current budget deficit in three years.
He said: "The headroom he set aside to reach those targets is the second-lowest headroom that any chancellor has had when setting fiscal rules."
He said the targets were on a knife edge, adding: "Just a 1% interest rate rise could easily wipe out the chancellor's headroom."
