PAY is growing at its slowest rate in almost two years, new figures revealed yesterday.

Official stats released on Wednesday showed a fall in unemployment to just under 1.6 million. These positive findings were tarnished however by news that average earnings in the year to December had increased by just 2.6 per cent.

The TUC said this was the slowest rate of real pay growth in two years, with a narrowing gap between inflation and wage rises.

“This will be worrying for families whose have still not seen their living standards recover following the financial crisis,” TUC general secretary Frances O’Grady said.

“Next month’s Budget must set out a clear plan for preventing another fall in living standards. The Chancellor [Philip Hammond] should tackle insecurity at work, invest in infrastructure and skills and end the current pay restrictions on nurses, teachers and other key workers.”

Unemployment had also risen in some areas of Britain in the final quarter of 2016, with the number of people out of work increasing by 7 per cent in north-east England, 5.9 per cent in the West Midlands and 4.9 per cent in Scotland.

The largest falls were seen in London (5.5 per cent) and Yorkshire and Humberside (both 5 per cent).

Civil Service union PCS leader Mark Serwotka said: “The government needs to act to put money in people’s pockets and arrest the decline in living standards.

“The first step must be for the Chancellor to use his upcoming Budget to end the public sector pay cap that has meant civil servants have lost up to one fifth of their real incomes.”

The TUC warned last month that the government’s pay cap on public sector workers will see nurses, teachers and firefighters lose thousands of pounds in real terms before the end of the decade.

Work and Pensions Secretary Damian Green said the figures showed Britain in a “position of strength,” adding: “Our ongoing welfare reforms will continue to incentivise work and make sure the system is fair to all those who need it and those who pay for it.”

But his Labour counterpart Debbie Abrahams blasted: “If this trend [falling real wages] continues, the government’s abysmal record on living standards will get even worse.”

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