Business

Budget 2013: Public sector pay rise cap extended

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Image caption The finances of many public sector workers will be affected by a pay cap

A 1% pay rise cap for public sector workers will be extended for an extra year to 2015-16, Chancellor George Osborne has announced.

The move comes as some civil servants stage a one-day strike over pay and pensions.

Mr Osborne said that public sector pay would be limited to an average of 1% including in 2015-16.

Progression pay will also be limited. However, the military will be exempt from this change.

"We are also accepting in full from 1 May this year the Armed Forces Pay Review Body's recommended increase in the so-called X Factor payment made to military personnel to recognise the particular sacrifices they make," the chancellor said.

That means the military will receive a 1.45% increase in basic pay in May, which is still below the rising cost of living.

"Local government and police allocations for 2013-14 have already been set out and will not be affected," the chancellor added.

Progression pay is the effect on pay packets of public sector workers moving up a pay band.

Recent rises

The 1% pay rise limit was put in place for two years in the Autumn statement, after a public sector pay freeze. This will now be extended to three years.

The change to pay mimics, in part, a 1% cap on many working-age benefits for three years from April 2013. This was announced in the chancellor's Autumn Statement in December.

Official figures published earlier in the day showed that workers - in the public and private sectors - saw average earnings rise 1.2% over the three months between November and January, compared with the same period in 2011-12.

With inflation running at 2.7%, that meant that they fell in real terms.

Some of the changes to public sector pay have already angered unions.

The Public and Commercial Services union is staging a strike over pay and pensions to coincide with Budget Day, as part of a three-month plan of action.

Frances O'Grady, general secretary of the TUC, said: "Family budgets are at breaking point and millions of nurses, teachers, firefighters, council workers and civil servants will have been hoping the chancellor might ease their pain today, not add significantly to it."

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