In his pre-budget statement to the Commons, chancellor George Osborne announced that public sector pay awards will be set at an average 1 per cent for 2012 and 2013.

He also instructed the Cabinet Office to review how more local 'market-facing' pay could be introduced in civil service departments, so that secretaries of state could make recommendations for their own departments.

And he asked the pay review bodies to report back by July 2012 on making public sector pay more responsive to local labour markets.

With RPI inflation running at 5.4 per cent and CPI inflation at 5 per cent, the pay freeze of the last two years has already meant a cut in living standards of over 10 per cent. With forecast inflation over the next two years and imposed pension contribution increases, public servants will be left 17-19 per cent worse off over the four years.

General secretary Paul Noon said: "Once again, public servants are being forced to bear the brunt of this recession, even though they are not to blame.
"It's not militants who are itching for a fight, it's the government. Our members are moderate specialists and professionals, whose expertise is often in short supply, and whose skills command a higher premium in the private sector."

Figures compiled by the Office for National Statistics show that in 2010, employees with a degree or equivalent qualification on average earned around 5.7 per cent less in the public sector than the private sector. The much-publicised pay lead for the public sector reported in the media is an average figure, meaningless unless equivalent jobs are being compared, said Noon.

Osborne also announced he is bringing forward an increase in the state pension age. Noon added: "By unilaterally announcing a change in the pension age to 67 and by capping pay increases at 1 per cent, George Osborne has made it even harder to reach a deal on pensions."