In his budget, to be presented on Wednesday, George Osborne will announce a further cut on public sector spending and pay to fund his pet projects.
The British Chancellor of the Exchequer has prepared plans to end the system of pay progression by introducing a single-tier pension at a minimum of £144 a week in 2016-17.
Modifications to the state pension will bring the exchequer a stealth windfall of almost £6bn annually from 2016-17 of which, £2.2bn will be used to fund the Dilnot proposals on social care and other Treasury initiatives.
Getting rid of the contracted-out rebate will cost public sector employers £3.5bn a year, money which the Treasury is not planning to offset with a higher total for public spending, reported the Financial Times.
The Treasury supports that the rise in national insurance contributions and end to pay progression will squeeze salaries further.
A Treasury spokesman explained that public sector pay had outstripped its private sector equivalent before 2010, creating a disparity. The spokesman further said the government had not torn up the rule book on progression pay but wanted to set out a clear direction of travel.
Meanwhile, officials have set out new plans for departments to propose an end to automatic time-served progression as a way to save costs in the 2015-16 spending review to be held in June.
Those changes would apply to the departments like the Home Office, parts of the Ministry of Justice and the departments of transport, international development, business and communities.
Education Secretary Michael Gove said in January 2013 that performance-related pay for teachers would begin in the autumn after a recommendation from the School Teachers’ Review Body to end automatic progression.
In the recent time, the NHS Employers organisation said that it wanted closer links between performance and progression.
“People will see this as adding insult to injury,” said a spokeswoman for Unison, the public sector union. The PCS civil service union said Osborne was seeking to “keep wages low for many years to come”.