The Chancellor angered unions today by announcing plans to cap public sector pay rises to 1% for two years from 2011.
Alistair Darling also said that contributions from the state to the pensions of teachers, local government and health workers and civil servants would be capped, saving £1 billion a year.
Workers will have to make a greater contribution to pensions, with those earning over £100,000 paying more, he told the Commons.
The Government said the senior civil service pay bill would be cut by up to £100 million over three years and any new government appointment over £150,000 and all bonuses over £50,000 would require Treasury approval.
Brendan Barber, general secretary of the TUC, said a centralised pay cap on public sector staff was unfair and inefficient and would damage long-established independent review systems.
"What we need is a fair tax system to make sure that those who did so well out of the boom years make a proper contribution, rather than expecting public sector workers, many of them low paid, to pay the price."
Dave Prentis, general secretary of Unison, reacted angrily to the 1%, two year pay cap and pensions cap on public sector workers, saying he had no intention of "signing up" to the move.
"Our members feel angry and betrayed. It is just not on to make nurses, social workers, dinner ladies, cleaners and hospital porters pay the price for the folly of the bankers.
"The people who earn most should pay the most. Instead we have the disgraceful spectacle of rich bankers threatening to leave the country if they don't get their massive bonuses.
"We have no idea what inflation will be like in 2011 and beyond. Nor do we know what the future price will be of essentials such as food and fuel. We are on the same side of the street as our members and I won't let them see their living standards eroded."
Mr Prentis said capping pension contributions would reduce the "already small" public sector pensions even further, adding: "The average pension in local government is just £4,000 a year and less than £2,000 for women. This predicted £1 billion saving could end up being paid out as benefits to those very same workers to keep them out of poverty in retirement.
"We know that for every £1 a public sector worker earns they spend 70p in their local community. Any squeeze on their pay will put a stranglehold on local businesses and services, cutting off much needed income."Reuse content