His warning comes after Chancellor George Osborne called for an above-inflation increase in the national minimum wage.

Osborne told the BBC the “economy can now afford” to raise the rate, currently set at £6.31 an hour for people over the age of 21 and that “it would have to increase to £7 an hour by 2015 for its value to return to where it was before the economic downturn struck”.

He also told the BBC that since coming to power in 2010, the coalition had “rescued the country from the brink of disaster and got us into a position where we can now see the minimum wage going up for people and, more broadly. I want living standards to go up for the whole country as we fix the economy.”

The TUC, which represents more than six million workers, welcomed the Chancellor’s proposals.

TUC General Secretary Frances O’Grady said: “We welcome George Osborne’s acceptance of the TUC’s case for an above inflation rise in the minimum wage.

“But while this would help many, the Chancellor should be more ambitious about achieving decent pay rises across the whole of the UK workforce.

“The government should work with unions and employers to increase the spread of the living wage, lift the cap on public sector pay, and recognise that the wages of millions of workers across the economy have been falling in real terms and now need a decent increase.”