Labour has claimed that the Treasury stands to lose up to £100billion in revenue as a result of sluggish wage growth.
The party has pointed the finger at paltry pay packets, which have led to income tax receipts and National Insurance contributions falling by almost seven per cent during the course of this Parliament.
It is estimated that the shortfall now stands at £95billion and Labour claims that if wages don’t start to increase, it will cost government coffers an additional £109billion over the next five years.
Conversely, if salaries start to rise in line with the historic average, tax receipts are likely to be more healthy than those recently forecast by the Office for Budget Responsibility.
Labour believes the figures illustrate how the so-called “cost of living crisis” continues to have a damaging effect on the UK economy.
Only last week it emerged that government targets for cutting the deficit had been knocked off course because tax receipts were not rising as quickly as expected.
Shadow Chancellor Ed Balls has accused the Coalition of pouring all its resources into cutting public spending, while disregarding issues such as wage growth.
“Only an economic plan that has rising living standards for all at its heart will deliver the tax revenues that are essential for getting the deficit down in a fair way,” he said at the start of the year.
“That’s why Labour’s plan to change our economy – including raising the minimum wage, increasing apprenticeships, getting more homes built and reforming the banks – is a vital part of our plan to balance the books.”