Emergency Budget: Public sector wages above £21,000 to be frozen for two years

The coalition’s Government emergency budget has revealed that there will be a two year pay freeze for public sector workers earning above £21,000.

The 1.7 million workers earning less than this amount will be protected and paid a flat payrise of £250 in both these years.

Pensions are guarenteed to rise in line with earnings, prices or 2.5 per cent, whichever one is greatest.

Public sector pensions are to undergo an inquiry by the Independent Pensions Commission, led by former Labour pensions minister, John Hutton. An interim report will be provided in September 2010 and a full report by the next budget.

The Commission will consider issues including the growing gap between public service and private sector pension provision, the need to ensure future pension provision is fair across the workforce, how risk should be shared between the taxpayer and employee and wider government policy intended to encourage adequate saving for retirement and longer working lives.

Osborne said: "I know there are many dedicated public sector workers who work very hard and did not cause this recession - but they must share the burden as we pay to clean it up."

"Many millions of people in the private sector have in the last couple of years seen their pay frozen, their hours reduced, and their pension benefits restricted. They have accepted this because they knew that the alternative in many cases was further job losses."