Public sector wages are now falling in real terms, a leading think tank has warned.

A combination of austerity and inflation means that the trend is also set to continue for the next three years, according to the Resolution Foundation.

Increases in most public sector salaries are capped at one per cent a year until the end of the decade.

But inflation has been on the rise since the vote to leave the European Union and is expected to continue to rise.

The Foundation forecasts that average real pay in the public sector will fall back below 2004-05 levels by 2020.

On current trends average pay yearly packets will also be £1,700 lower in 2019-20 than they were at their peak in 2009-10, the organisation estimates.

Adam Corlett, an economic analyst at the Resolution Foundation, said: “While rising inflation is applying the brakes to real pay growth across the board, the outlook for public sector pay looks particularly weak. Pay is now actually falling and worse is expected to continue for the rest of the parliament, with levels at the end of the parliament dropping back to levels last seen in 2004. “Although public sector pay restraint is important to the government’s deficit reduction plans, falling real pay is likely to see increasing recruitment strains. The government should be planning now how to manage those strains, alongside any wider changes to policies like migration that will also have an impact.”