Budget: Osborne freezes public pay for two years

In his budget speech on 22 June 2010, George Osborne said that public sector pay will be frozen for two years, reflecting similar freezes in the private sector. However, he said that 1.7m staff earning less than £21,000 will receive a £250 pay rise each year. This represents 28% of the public sector workforce. Overall, the government will reduce its deficit primarily through cuts to spending. The chancellor said that 77% of the contribution from the budget to cutting the deficit is from lower spending, with 23% from tax increases, including a rise in value added tax from 17.5% to 20% from January 2011, and cuts in welfare payments. Osborne said that £30bn will be cut from annual government spending. However, he said he would make no further cuts to capital expenditure in the budget speech. He confirmed that NHS and foreign aid spending will be protected, but that other departments will face cuts of around 25% over four years, although the exact reductions will be announced in the public spending review, which will be presented to Parliament on 20 October. The government will also support local authorities in freezing council tax in England. Osborne confirmed the abolition of a tax of £6 a year on landline telephones. Instead, the government will support extension of broadband infrastructure to rural areas, partly through using underspend from the digital switchover fund within the television licence fee.