The last time that average take-home incomes fell in real terms, Britain was mired in the recession of the early 1990s. Today’s report by the Institute for Fiscal Studies (IFS), that average households got poorer in 2003-04, is shocking precisely because it comes out of a clear blue sky. These are far from being dark days. Today, as the Chancellor is fond of reminding us, Britain is enjoying the longest continuous period of economic growth for a century. Only two weeks ago Gordon Brown was extolling, once again, the very real successes of the British economy in his Budget speech. There is thus no doubting the IFS’s conclusion that average incomes have fallen as a direct result of Mr Brown’s taxation policy.

In 2001 Labour promised that it would not raise taxes if it were re-elected. Mr Brown broke that promise in 2002. Few voters failed to spot that the rise in national insurance contributions and the freezing of the personal income tax allowance were taxes like any other. The Government’s efforts to blame council tax rises on local authorities also backfired when it became apparent that ministers were forcing councils to spend more on national priorities. It will not take long, therefore, for voters to place the blame squarely on the Government for the pinch in their pockets.

In statistical terms, the actual drop in average household incomes is small: only 0.2 per cent in real terms between 2002-03 and 2003-04. It is the direction that is significant. No government should be comfortable with breaking its tacit contract with the people that their living standards will continue to rise — certainly not in order to finance spending increases that have yet to show an equally substantial return.

The new study not only exposes the Chancellor’s tax regime: it also shines the spotlight more clearly on his equally stealthy policy of wealth redistribution. While the incomes of the richest fifth of households fell by around 1 per cent in 2003-04, those of the poorest fifth were boosted by about the same percentage through the introduction of the child tax credit and the working tax credit. This was deliberate Treasury policy, but not one that was shared very often with the nation.

In the run-up to the election it has so far been assumed, not least by the Chancellor, that voters will be inclined to vote with their pockets. Indeed, Labour’s main concern about this strategy is that too many voters have grown so used to rising prosperity that they have become complacent and may not turn out to reward the party for its performance. For the Conservatives, the IFS report therefore brings an opportunity after a week of self-inflicted turmoil.

Back in December, a Times/Populus poll found that both Conservative and Labour supporters decisively opposed further tax rises. The expectation that the Chancellor would need to raise taxes again after a Labour victory may play rather more on voters’ minds if they believe that they are already sliding backwards despite working hard.

It is clearly ironic that ministers have jeopardised the very feel-good factor they so desperately seek, through their own deliberate efforts. The latest retail figures will only enhance a certain bleakness of outlook. Whatever the electoral impact, the IFS study suggests that Labour’s twin strategy of tax rises and redistribution is close to exhaustion.