The Office for Budget Responsibility says household income will fall by 7% over the next 18 months.
The chancellor said tax rises and a spending squeeze in his Autumn Statement would help tame inflation which he said had caused the drop.
But Labour said he had picked the nation's pockets with "stealth taxes".
Shadow chancellor Rachel Reeves described the emergency budget measures as "an invoice for the economic carnage" created by the policies of former Prime Minister Liz Truss.
In a sombre statement lasting just under an hour, Mr Hunt undid much of the tax-cutting mini-budget unveiled by his predecessor as chancellor, Kwasi Kwarteng, only 55 days ago.
It was deliberately stripped of surprises and political theatre, with many of the announcements having been trailed in the media beforehand.
BBC economics editor Faisal Islam said the statement was comprised of two halves - the first covering the years until the next general election in which there would be further support for households, and the second coming after 2025 when spending cuts would kick in.
The key measures were:
* Tax thresholds will be frozen until April 2028, meaning millions will pay more tax
* Spending on public services in England will rise more slowly than planned - with some departments facing cuts after the next election
* The state pensions triple lock will be kept, meaning pensioners will see a 10.1% rise in weekly payments
* The household energy price cap has been extended for one year beyond April but made less generous, with typical bills capped at £3,000 a year instead of £2,500
* There will be additional cost-of-living payments for the "most vulnerable", with £900 for those on benefits, and £300 for pensioners
* The top 45% additional rate of income tax will be paid on earnings over £125,140, instead of £150,000
* UK minimum wage for people over 23 to increase from £9.50 to £10.42 an hour
* The windfall tax on oil and gas firms will increase from 25% to 35%, raising £55bn from this year until 2028
Speaking afterwards, Mr Hunt told the BBC's political editor Chris Mason his plan would bring down inflation, while protecting public services.
"These are real challenges for families up and down the country," he said adding: "I'm not pretending these aren't going to be difficult times, but there's a plan, there's hope - and if we follow this plan, if we stick with it, we can get through to the other side.
"We need to be sensible about the way we do this. We don't want to make the recession worse."
The chancellor announced extra money for schools, the NHS and social care in England for the next two years.
Mr Hunt denied that he had been forced to raise taxes and reduce spending because of the turmoil caused by Ms Truss's mini-Budget.
He said there had been mistakes, but insisted the government had "corrected those within weeks".
He argued that other countries, such as Germany, France and America were all facing similar problems as a result of the conflict in Ukraine and rising energy prices.
But, Mr Hunt denied he'd postponed difficult decisions, with the squeeze on government departments to come.
The OBR, which produced an economic forecast to accompany Mr Hunt's Autumn Statement, says high inflation and rising interest rates will lead to consumers spending less, tipping the UK's economy into a recession "lasting just over a year".
It predicts the economy will shrink by 1.4% in 2023 before growth slowly picks up again.
The forecaster also says that as a result of Mr Hunt's decisions, the tax burden would rise to its highest level since the end of World War Two.
Attacking his plans in Parliament, Ms Reeves said Mr Hunt had introduced "a Conservative double whammy that sees frozen tax thresholds and double-digit inflation erode the real value of people's wages".
She accused the government of increasing taxes by "stealth" arguing that freezing the personal allowance - the amount of income someone does not have to pay tax on - would cost an average earner more than £600 per year.
The Liberal Democrats said people were "being forced to pay the price for this Conservative government's incompetence".
The SNP's Treasury spokeswoman Alison Thewliss said: "This is a UK so weak that no-one would wish to join it - Scotland cannot be forced to stay in broke, broken, Brexit Britain."
There was also an attack from the chancellor's own side with former cabinet minister, Conservative MP Jacob Rees-Mogg arguing that the measures announced were based on unreliable economic forecasts.
"I'm particularly concerned about the tax rises, when an economy is going into recession. You have to be slightly easier in a fiscal sense, than you do when you're at the peak of a boom."
Meanwhile, a Conservative MP is seeking assurances from the chancellor that he will not increase fuel duty.
The tax is suppose to rise in line with inflation, but has repeatedly been frozen. The Treasury has said a final decision would not be taken until the next budget in spring 2023.
Writing to the chancellor, Conservative backbencher Jonathan Gullis warned that a "substantial number" of Tory MPs would be opposed to a rise.
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