Pay cap announced on eve of strike
Chancellor George Osborne has announced new restrictions on public-sector pay ahead of the national strike as new official forecasts set out a grim prospect for UK jobs and growth in the coming years.
Annual rises in the public sector will be capped at 1% for two years following the conclusion of the current pay freeze in 2012, condemning millions of workers to a real-terms cut in their income.
In a gloomy assessment published alongside Mr Osborne's Autumn Statement, the Office for Budget Responsibility (OBR) downgraded predictions for UK GDP growth and revised borrowing and unemployment upwards. Mr Osborne will have to borrow £111 billion more over the next five years than previously expected, said the independent forecasters.
Ratings agency Fitch said on a broader measure of government debt used in international comparisons - which shows net public-sector debt hitting 94% of GDP in 2014/2015 - the UK will become the most indebted AAA-rated nation in the world except for the US.
Unemployment will rise from 8.1% this year to 8.7% in 2012, adding 210,000 to the dole queues. The OBR's prediction for job losses in the public sector rose from 400,000 to 710,000 by 2017.
While the OBR did not foresee a "double-dip" recession for the UK - as the Organisation for Economic Co-operation and Development did on Monday - it cut forecasts for GDP growth for each of the next four years.
Growth is now expected to be 0.9% this year (down from 1.7% in the OBR's last forecast at the time of the March Budget), 0.7% in 2012 (down from 2.5%), 2.1% in 2013 (from 2.9%) and 2.7% in 2014 (from 2.9%). The structural deficit will not be eliminated until 2016/17, according to the OBR predictions - two years later than it forecast in March.
In measures to help fill the hole in the country's finances, Mr Osborne brought forward the increase in the state pension age to 67 by almost a decade to 2026, and announced that tax credits will be held down for many working people.
But he had some good news for motorists and rail users, cancelling a 3p fuel duty rise scheduled for January and reducing planned train fare increases to inflation plus 1%.
Pensioners will see a £5.30-a-week boost to £107.45 in their basic state pension and working-age benefits will be uprated in line with the unusually-high CPI inflation rate of 5.2% recorded in September.