Lowest paid public sector works spared pay cut in Budget

The lowest earning public sector workers will be spared a pay freeze, under plans announced by chancellor George Osborne in today’s Budget.

The 1.7million public sector workers earning less than £21,000 a year will receive a flat pay rise of £250 in each of the next two years. Those paid more will be subject to a two-year pay freeze.

Osborne pledged to end “the culture of excessive pay” in the public sector.

He also promised action to reduce a £10bn black hole on public sector pensions, saying that John Hutton, the former Labour work and pensions secretary, will complete an interim report on the issue by September, in time for the comprehensive spending review.

Hutton will complete a final report on cutting public sector pension costs in time for next spring’s Budget.

Efforts to cut expenditure will also have a huge impact on service users.

Disability living allowance costs will be cut, the chancellor pledged, stating three times as many people were paid the benefit as when it was introduced 18 years ago.

Osborne said a medical assessment for both those seeking the benefit and those already seeking it would be introduced by 2013. He said the measure would “significantly improve incentives to work”.

However, there was positive news for disabled people. Housing benefit will be paid for the first time to disabled people requiring an extra room to support a carer, the chancellor said.

Pensioners also benefited with the announcement that the link between pensions and earnings would be restored.

Child benefit, however, will be frozen for three years.

The private sector, in comparison, received a major boost with the revelation that corporation tax will be cut by 1p a year in each of the next four years.

“We are a progressive alliance governing in the national interest,” Osborne said of the new government.

There will be a new levy on banks, expected to raise £2bn.

And consumers will be hit with value added tax will be increased from 17.5% to 20%.

Osborne said of his Budget: “Everyone will pay something but those at the bottom of the income scale will pay proportionately less than those at the top,” he insisted.

“We have been tough but we have also been fair.”