The budget will hit living standards in the short term while the government hopes to boost economic growth in the long term, according to the Resolution Foundation think tank.
Chancellor Rachel Reeves' decision to increase taxes and borrowing to fund public services and investment is a clear departure from the cuts announced by the previous government, the statement said.
But he warned that the Budget “has not yet brought a decisive change to Britain's record as a 'stagnant nation'” as prospects for growth and living standards remain weak.
On Wednesday, Reeves announced Labor's first budget since 2010, after the party returned to power in July's general election.
“The short-term effect of these changes will be better funding for public services,” said Mike Brewer, interim chief executive of the Resolution Foundation.
“But families will also have to face a further decline in their standard of living, as increases in employers' national insurance dampen wage growth,” he added.
New tax and welfare policies will affect everyone, said the think tank, which aims to improve the living standards of low- and middle-income families.
It calculated that the poorest half of households will see their annual income fall by 0.8% on average, while the richest half will face a 0.6% drop.
Wealthy households are expected to experience the greatest overall impact due to capital gains and changes to inheritance tax.
The foundation expects wage increases to be hurt by a combination of an already tough outlook, weaker growth from higher employment taxes and higher inflation.
This means that by 2028 the real weekly wage will have increased by just £13 over the last two decades, it says.
In its general election manifesto, Labor promised not to raise taxes on workers – explicitly ruling out an increase in VAT, national insurance or income tax.
This commitment has come under scrutiny, with some claiming that increasing the National Insurance rate paid by employers breaks this commitment, something the government has denied.
The Resolution Foundation also warned that the decision to accelerate increases in spending on public services this year and next means the spring spending review will be difficult.
Reeves also left herself with a “relatively thin margin,” he says.
The chancellor's new debt rule leaves more room for maneuver, but most of this money has already been used, meaning even a slight economic downturn could force the government to raise taxes further. 'future,' the think tank said.
Reeves told the BBC on Wednesday that “this is not the kind of budget we would want to repeat.”
“This is the budget we need to wipe the slate clean and put our public finances back on a firm trajectory,” she said.
Health, education and transport will see increased spending, with the biggest increase in NHS funding since 2010: an extra £22 billion for the frontline and an extra £3 billion for equipment and buildings.
