The government plans to introduce three-year pay deals for 6 million public sector workers from this year to help keep inflation under control, Chancellor Alistair Darling said on Tuesday.
"The prize of getting 3-year deals so that employees know exactly where they stand and we get people looking at the long term is a very great prize indeed and that's why we are determined to go for it," Darling told BBC radio.
The Treasury says the plan will merely bring pay settlements in line with government departments' spending limits, which are also set on a three-year basis. It also says agreeing pay deals along the same lines would help it to set the inflation target.
Darling told the BBC that keeping a lid on price pressures was now all the more important given economic uncertainty ahead and that keeping public sector pay deals under control had given the Bank of England leeway to cut interest rates last month.
But his announcement has angered unions, who argue public servants are already suffering under the government's policy of restricting pay increases to the 2 percent inflation target, which they say does not match the rising cost of living.
Retail price inflation, on which most private sector pay deals are based, is currently running above 4 percent and a recent survey showed public sector pay deals in 2007 were the lowest in at least 13 years.
The Treasury said it planned to roll out the three-year wage deals over the course of this year, although they were not compulsory and pay deals are still subject to negotiation with unions.
"At every single level, whether it's in relation to public sector pay, whether it's in relation to what the government does, we need to make sure that we try and keep inflation as low as possible, because if inflation is kept down that doesn't only reduce mortgage rates and therefore reduce household bills but it also means that we can get continued economic growth," Darling said.
