Treasury calls for wage freeze in public sector

Whitehall is proposing a pay freeze for 40,000 senior public servants and a 1 per cent ceiling on rises for a further 750,000 workers in the public sector.

In the clearest sign yet of the squeeze on public spending needed to fill the black hole in the Government's finances, the Treasury last night called for the first public sector pay standstill for 30 years.

The timing of the announcement will be viewed with suspicion by the Tories, coming on the eve of a keynote speech by the shadow Chancellor, George Osborne, which will outline Conservative plans to tackle the public deficit.

A Tory spokesman said: "It is surprising that the Labour Chancellor chose to make this announcement – which affects hundreds of thousands of people – in the middle of a Conservative Party conference."

The recommendation, disclosed in the Treasury's evidence to pay review bodies, would affect judges, NHS managers, GPs, chief executives of quangos and senior civil servants.

It also called for rises of between zero and 1 per cent in the 2010-11 financial year for workers including hospital doctors, dentists and prison staff. The review bodies will make their proposals next spring but the final decision rests with the Government.

Groups such as teachers, nurses and the police will escape the clampdown as they are in the middle of three-year pay settlements. Ministers have rejected calls to reopen these above-inflation deals even though prices have fallen sharply during the recession.

Armed services chiefs, whose pay is under review this winter, have been left out of the group facing a freeze in recognition of the unique pressures they face, not least in Afghanistan.

Liam Byrne, the Chief Secretary to the Treasury, said: "Britain's public servants are invaluable. But if we want to halve the deficit over four years and protect frontline services, we have to make tough but realistic decisions on pay. That means leadership from senior groups and realistic increases for other workforces."

Ministers will cite the proposed pay freeze as a sign they are ready to take the "tough choices" needed to bring down a public deficit forecast at £175bn in the current financial year.

A spokeswoman for the British Medical Association said: "Now is not the time to demoralise doctors. A pay freeze won't help with recruitment and retention. Given the responsibilities GPs have and the level of training needed we don't feel that's the way to proceed."

Pay accounts for about 40 per cent of public spending and the clampdown will worry trade unions representing lower paid state employees. Ministers have warned their union leaders privately that the only alternative to a pay squeeze would be huge job losses.

Further details of how Labour would close the gap once the recession has ended will be spelt out by the Chancellor, Alistair Darling, in his pre-Budget report next month. The Chancellor said at the weekend: "At a time like this we are going to have to ensure we take robust measures to get borrowing down." He will spell out which frontline services would be protected by Labour, enabling him to challenge the Tories to reveal where they would cut to honour their pledge to bring down the deficit more quickly.

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