Ten of thousands of public sector workers are to lose their automatic annual pay rises, Chancellor George Osborne has said as he unveiled a spending review involving £11.5 billion in further cuts.
He claimed that Britain was "moving out of intensive care - and from rescue to recovery". However, he said the spending review involved "difficult decisions", adding: "There never was an easy way to bring spending under control."
Mr Osborne said public sector pay rises will be limited to an average of up to 1% for 2015-16. He went on: "But the biggest reform we make on pay is to automatic progression pay. This is the practice whereby many employees not only get a pay rise every year, but also automatically move up a pay grade every single year - regardless of performance. So we will end automatic progression pay in the Civil Service by 2015-16.
"And we are working to remove automatic pay rises simply for time served in our schools, NHS, prisons and police." The move, from which the armed forces will be excluded, is bound to provoke fury from public sector trade unions, who claim their members are already paying the price of austerity.
Mr Osborne announced that the council tax freeze, due to come to an end next April, would be extended for the next two years. He said that would mean nearly £100 off the average council tax bill for families. But he warned that local councils would have to make "the kind of sacrifices central government is making". He said the local government resource budget would be reduced by 10 per cent in 2015-16.
Scotland, Wales and Northern Ireland do not escape the squeeze with all three required to find savings of 2%, with a budget for Scotland of £25.7 billion, Wales on £13.6 billion and Northern Ireland on £9.6 billion.
Mr Osborne also said that the Ministry of Defence would face further cuts to its civilian workforce as its budget was maintained in cash terms at £24 billion - representing a real terms cut. But the equipment budget will rise by 1% per annum - as previously promised - and there will be no further reductions in military personnel.
Winter fuel payments for expat pensioners who have retired to sunnier climes will be linked to a "temperature test" from autumn 2015, the Chancellor confirmed. "People in hot countries will no longer get it. It is, after all, a payment for winter fuel," he said.
Mr Osborne also announced that jobseekers will be required to come to the jobcentre every week rather than once a fortnight and the introduction of a new seven day wait before people can claim benefits. He went on: "From now on, if claimants don't speak English, they will have to attend language courses until they do. This is a reasonable requirement in this country."
The Chancellor promised investment in education and accelerated school reform, with the overall budget of the Education Department increasing and schools spending protected in real terms. To transfer power - and money - from town halls and central bureaucracy to schools he said grants to councils and spending on central agencies were being reduced while cash going to schools will go up.