In his Autumn Statement 2011, Chancellor George Osborne announced that pay increases for public sector employees will average 1% for each of the two years after current pay freezes end.
The announcement comes the day before thousands of public sector workers plan to strike over changes to their pensions.
Delivering the statement, Osborne asked for the strikes to be called off and for negotiators to return to the table
Savings from the pay increase cap will help to support balanced economic growth, social mobility, and help young people find work.
Dave Prentis, general secretary at public sector union Unison, said: “We desperately need to get Britain spending. A bad situation will only be made worse by imposing a £3.6 billion tax on public sector pensions, by holding down public sector pay, and by throwing hundreds of thousands of public service workers onto the dole.
“It is time to drop the public sector pensions tax, and take steps to put money back into people's pockets. This will boost growth and get Britain hiring – as it is, the private sector is in no position to dig the country out of trouble."
Charles Cotton, rewards 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 1% 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)."
Christopher Johnson, head of Mercer’s human capital business, said: “Easing the public sector pay freeze by capping pay increases at 1% should be welcomed by public sector employees.
“This increase, plus incremental progression, will ensure that public sector average earnings growth continues to outstrip private sector earnings growth.
“Our view is that it is right to restrain public sector pay. There is both an issue of affordability and an urgent case for pay reform.
"While the government's short-term actions address short-term affordability pressures, the government must address the fundamental long-term issues about how much public servants should be paid and how public sector pay can better encourage a culture of performance.”
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