The government should provide more debt advice for lower earners according to a report from a leading charity.

The study, by the Institute of Employment Rights (IER), suggests that people on low wages are currently suffering financially because of the way the complex tax system operates and that they are also suffering most from the economic downturn.

It has called for the government to do more to assist people struggling to get out of debt, by providing further debt advice services, by increasing the minimum wage and by making the tax system fairer.

Carolyn Jones, Director at the IER, said: “The tax system should be used in a more progressive way to break down inequality in our society.

“We would like to see the minimum wage raised to half the median male earnings. It should take it up from £5.80 or whatever it is now, to around about £7.

“We do have the national minimum wage but it has been set at such a low rate, we argue it institutionalises low pay [rather] than solve the problem.”

She also added that the minimum wage was still “miniscule” when compared to the money earned by executives.

Ivan Cooper, Chairman at debt advice specialists Chiltern, said: “People on lower wages are usually the first to be affected by an economic downturn, as any increase in costs or reduction in income is amplified.

“This can often mean that any outstanding debts become difficult to maintain and the impartial advice of a reputable debt help organisation, like Chiltern, is often required to make repaying debts more manageable.”

The IER’s demand for more help with taxes for lower wage earners follows the call from the Trades Union Congress (TUC) for limits on the amount of tax relief that can be claimed by those earning more than £100,000.

New analysis by the TUC shows that 3.1 per cent of the tax-paying population receives a whopping 31 per cent of all tax relief, averaging £18,750 a year each.