AUSTERITY driven pay freezes have cost the UK an extra £33.4Bn in the national deficit according to analysis of figures highlighted by the Trade Union Congress (TUC).

This is according to independent analysis in the TUC’s report, The living standards tax gap just got bigger, based on the wages forecast made in June 2010 by the Office for Budget Responsibility (OBR), the government’s official watchdog for fiscal policy.

If earnings growth had been in line with the OBR forecast, income tax and national insurance receipts this year would total £308.4Bn. But the TUC analysis finds that the Treasury is now expected to collect just £275Bn.

The £308.4Bn figure does not take into account reduced revenues as a result of the government’s income tax cuts. However, if the government had chosen not to introduce unfunded tax cuts (which have provided far less support to low income workers than they would have received from wage rises), revenues would be even higher, rising by a further £9.7Bn.

The news comes a week after the prime minister, David Cameron, called on UK employers to start giving out higher pay rises.

The TUC says that the government’s failure to get wages growing across the current parliament has left it with a much larger deficit than planned – a view reinforced by recent revisions by the OBR. In its December 2014 Fiscal Outlook report, the OBR said it had increased its forecast for government borrowing due to “a large and increasingly downward revision to receipts, notably income tax”.

The OBR now expects the government to have borrowed £91Bn in the year to March 2014/15, which is £54Bn higher than the chancellor, George Osborne, had originally planned.