Public sector pay increases will only rise by an average of one per cent once the current freeze period has ended, the Chancellor has revealed.

The Autumn Review, announced earlier today, set out the need for continued reductions in public spending in order to “maintain economic stability”. George Osborne declared that a two per cent raise in salary that many public sector entities were expecting to award was not affordable.

The Chancellor confirmed that following the two-year remuneration freeze, staff will have to face a further two years of one per cent rises.

Unison, the country’s biggest public sector union has responded angrily to the announcement
and argued that holding down pay will bring “misery to millions of families” and will reduce economic growth.

Charles Cotton, Reward Adviser at the Chartered Institute of Personnel and Development (CIPD), said: “While the CIPD understands why the Government plans to cap public sector pay rises at one per cent for the next two years as existing two-year wage freezes come to an end, we hope that rises can be focused on the lowest paid [and the best performers].”

Other measures put forward by the Government include asking pay review bodies to assess how remuneration can be better aligned with local labour markets, an increase in the State Pension Age from 66 to 67 in 2026, as well as more investigation into employment law changes and integrating Income Tax and National Insurance.

The Chancellor also reiterated that the offer for pension reform in the public sector was fair, and urged unions to return to negotiations and to stop tomorrow’s strike action.