Ten of thousands of public sector workers are to lose their automatic annual pay rises, Chancellor George Osborne said today as he unveiled a spending review involving £11.5 billion in further cuts.
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.
The intelligence services - MI5, MI6 and GCHQ - emerged among the winners with a 3.4% increase in their annual budget.
But there will be cuts of 6% at the Home Office, 8% at the Foreign Office and 7% at the Department for Culture, Media and Sport - although funding for elite sports will be protected.
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."
The Public and Commercial Services union said it was "deeply unfair" to stop pay progression in the civil service.
"This will hold down pay for years to come and will deny workers an agreed rate for the job," a spokesman said.
Ministers have already announced plans for a major overhaul of teachers' pay.
Under the proposals, which are due to begin coming into effect from this autumn, pay will be linked to performance in the classroom, with schools setting salaries, rather than following a national framework.
The controversial move has been met with anger from teaching unions, who argue that it will depress teachers' living standards and harm recruitment to the profession.
Mr Osborne said public sector pay rises will be limited to an average of up to one per cent 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.
"Some public sector employees see annual pay rises of seven per cent.
"Progression pay can at best be described as antiquated; at worst, it's deeply unfair to other parts of the public sector who don't get it and to the private sector who have to pay for it.
"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.
But the Chancellor said: "Keeping pay awards down and ending automatic progression pay means that, for every pound we have to save in central administration, we can better limit job losses."
Further cuts in public spending will lead to an estimated loss of a further 144,000 jobs by 2015/16, the Chancellor said.
George Osborne said the number was predicted by the Office of Budget Responsibility as he confirmed cuts of 10% in areas including local government.
"I don't want to deny there will be further reductions in the number of people working in the public sector," he told MPs.
The Chancellor added that for every job lost in the public sector in the past year, five had been created by private firms, "demolishing" arguments against the coalition's policies.
Brian Strutton, national officer of the GMB union, commented: "I predict another 70,000 local government jobs will go in these cuts on top of the 420,000 that have already gone.
"This will take total number of jobs lost in local government to nearly half a million since the election in 2010.
"This is more than half of the entire public-sector job losses. This has coincided with a three-year pay freeze. It really has been a dire time for local government under the coalition."
- Savings of 10% to Scotland, Wales and Northern Ireland offices and 7% to Department for Culture, Media and Sport.
- New capital borrowing powers of almost £300 million for Scotland and an additional £31 million to help Police Service of Northern Ireland tackle terrorism.
- Scotland, Wales and Northern Ireland required to find resource savings of 2%, with a budget for Scotland of £25.7 billion, Wales £13.6 billion and Northern Ireland £9.6 billion.
- Commitment of £50 billion of capital investment in 2015, amounting to more than £300 billion for infrastructure including roads, railways, bridges, broadband, science and schools by 2020.
- More than £3 billion capital investment in affordable housing.
- Department for Communities and Local Government has agreed a further 10% cut in resource budget.
- Borrowing for this year is set to be £108 billion, compared to £157 billion under the last government.
- Total Government spending for 2015/16 will be £745 billion - £120 billion lower than if it had risen at the average rate of the last three decades.
- This spending round delivers total savings of £11.5 billion - some £5 billion of which will come from efficiency savings.
- Public sector pay rises limited to an average of up to 1% for 2015/16 and automatic progression pay in the civil service will be ended by 2015/16.
- Defence resource budget maintained in cash terms at £24 billion, while defence equipment budget will be £14 billion and will grow by 1% in real terms in following years.
- Site of Battle of Waterloo to be restored in time for 200th anniversary.
- Office for Budget Responsibility forecasts total number of people working for the Government to fall by a further 144,000 by 2015/16.
- Pupil premium to be protected in real terms.
- Treasury resource budget to be reduced by 10% in 2015/16, and Cabinet Office by 10%.
- Councils to be funded to freeze council tax for the next two years, saving an average £100.
- Single Local Growth Fund to provide £2 billion a year for Local Enterprise Partnerships.
- Local government resource budget to be reduced by 10% in 2015/16, but local government spending by around 2%.
- No reduction in numbers of soldiers, sailors or airmen, but cuts in civilian workforce.
- Increase of 3.4% in intelligence services budget.
- Departmental budget of Ministry of Justice to be cut by 10%.