George Osborne has confirmed that thousands of public sector workers are to lose their automatic annual pay rises, as he unveiled a further £11.5 billion in spending cuts.
The Chancellor said public sector pay rises will be limited to an average of up to one per cent for 2015-16, adding "but the biggest reform we make on pay is to automatic progression pay”.
He said: "This is the practice whereby many employees not only get a pay rise every year, but also automatically move up a pay grade every single year - regardless of performance… Some public sector employees see annual pay rises of seven per cent”.
Mr Osborne told the Commons that the spending review involved making "difficult decisions", adding “There never was an easy way to bring spending under control”.
He said: "Progression pay can at best be described as antiquated; at worst, it's deeply unfair to other parts of the public sector who don't get it and to the private sector who have to pay for it.
Mr Osborne went on: "So we will end automatic progression pay in the Civil Service by 2015-16… And we are working to remove automatic pay rises simply for time served in our schools, NHS, prisons and police."
The move, from which the armed forces will be excluded, is likely to provoke fury from public sector trade unions, who claim their members are already paying the price of austerity.
But the Chancellor said: "Keeping pay awards down and ending automatic progression pay means that, for every pound we have to save in central administration, we can better limit job losses."