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Public sector pay limited to 1% annual rise

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Pay rises for staff working in the public sector will be limited to 1% for four years from 2016-17, chancellor George Osborne has announced.

The measure is expected to save about £5bn by 2019, the Budget document said – it added similar restraint over public sector pay rises saved about £8bn in the past parliament.

Mr Osborne said while a “huge amount” had been done to increase efficiencies within government, there was “still much more” to do.

In his speech Mr Osborne said there was a “simple trade-off between pay and jobs” in most public services – the Budget document said public sector workers continued to benefit from a “significant premium” once employer pension contributions had been taken into account.

Mr Osborne said: “I know there has already been a period of restraint, but we said last autumn that we would need to find commensurate savings in this parliament.

“So to ensure we have public services we can afford, and protect more jobs, we will continue recent public sector pay awards with a rise of 1% per year for the next four years.”

Responding Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy, said: “The continuation of the 1% public sector pay freeze will help the government to control departmental budgets but it could also have an impact on some areas of the public sectors recruitment and retention such as hiring children’s social workers.”

The Budget document said the government expected pay awards to be applied in a “targeted manner within workforces to support the delivery of public services”.

It said pay reforms and the modernisation of terms and conditions for public sector workers would continue to be examined. “This will include a renewed focus on reforming progression pay, and considering legislation where necessary to achieve the government’s objectives,” it said.

The restraint on public sector pay is aimed at helping to fund a plan to save £37bn over the course of this parliament. Mr Osborne said £20bn will “largely” be taken out of government departments with details to be announced in the comprehensive spending review. The other £17bn will come from cuts to welfare (£12bn) and tackling tax evasion (£5bn), Mr Osborne said.

“However, no year will see cuts as deep as those required in 2011-12 and 2012-13,” Mr Osborne added.

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