The Government is collecting £17 billion less than forecast in income tax because of the lack of earnings growth, the TUC has claimed.

A study by the union organisation found that the Treasury is set to collect £159 billion in the current financial year, compared with a forecast of £176 billion made in 2010 by the Office for Budgetary Responsibility.

TUC general secretary Frances O'Grady said: "The Government's failure to get wages growing again has not only left families far worse off than in 2010, it's put the public finances in a mess too.

"The economy has become very good at creating low-paid jobs, but not the better paid work that brings in income tax.

"The Chancellor's sums just don't add up - he can't make the tax cuts for the better off that he is promising and meet his deficit reduction target without making cuts to public services.

"We can't cut our way out of this problem any more than we can dig ourselves out of a hole. More austerity would only keep us stuck in a downward spiral.

"The Chancellor should use next week's Autumn Statement to invest in growth and to put a wages recovery at the top of the agenda."