Public workers hit by pay rise cap

George Osborne faced a bruising new clash with public sector workers today after he capped their pay rises at one per cent from next year.

On the eve of the biggest strike by state employees for decades the Chancellor said he accepted the ceiling was "tough" for workers but insisted it was fair for the taxpayer. It follows a two-year pay freeze.

He also appealed to union chiefs to call off tomorrow's walk-out over pension reforms. More than 2.5 million public servants are set to strike over plans to make them work longer and pay more towards their retirement.

Mr Osborne told MPs it was "hard to imagine a better deal" than the one being offered to millions of civil servants, teachers, council workers and other state employees. He added: "I would once again ask the unions why they are damaging the economy at a time like this, putting jobs at risk. Call off the strike tomorrow, come back to the table, complete the negotiations and let's agree the generous pensions that are affordable to the taxpayer."

Dave Prentis, general secretary of Unison, said: "It's time to drop the public sector pensions tax and take steps to put money back into people's pockets. This will boost growth and get Britain hiring - as it is, the private sector is in no position to dig the country out of trouble. Not only is austerity hitting growth - the way it is being applied means unfairness is growing. The Government's cuts and austerity agenda is hitting women, the young, and making those who are less able to pay plug the deficit. Meanwhile it is still billions in bonuses for bankers. This is only storing up trouble for the future."

TUC general secretary Brendan Barber said he hoped that public service workers would support their unions in the "unprecedented, united campaign". He added: "And they shouldn't be bullied by some of the government campaigning. They should support the action and they should be proud to support the action."

Thousands of schools will close and operations will be postponed by the strike, and some flights have been cancelled. Mr Barber said he "genuinely" regretted the "difficult" disruption, but insisted the strike would build wider public support for the union's cause.