Union anger at threat of public sector pay freeze

Chancellor suggests state employees will not be immune to pain of the recession

Public sector employees have been warned that the cold blast of recession is going to hit their pay packets, because it would be unfair on the rest of the population if they were sheltered from its effects.

So far, the recession has brought heavy job losses in the private sector, which will continue to get worse, despite signs that the recession may be coming to an end. Even when the economy picks up, the Government will have to grapple with huge debts accumulated since last year.

This week, Gordon Brown will urge the leaders of the world's largest economies when they meet for the G8 summit at L'Aquila, in Italy, not to let up on their efforts to stimulate the global economy just because there are early signs that it is picking up. The Chancellor, Alistair Darling, dropped a hint that the next public sector pay round, which will be decided over the next few weeks, is not going to be generous.

"It has got to be fair to people who work for the public sector just as we have to be fair to the private sector," he told Sky News yesterday.

His remarks did nothing to cheer union leaders, who were already furious about a suggestion from the chief executive of the Audit Commission, Steve Bundred, that there should be no pay increases for public employees.

Writing in yesterday's Observer, Mr Bundred argued: "At a time when inflation is likely to be between 2 per cent and 3 per cent, a pain-free way of cutting public spending would be to freeze public sector pay, or at least impose severe pay restraint."

The suggestion that low-paid public employees should take what amounts to a pay cut was roundly condemned by Dave Prentis, general secretary of the main public sector union, Unison. "Freezing public sector pay during a recession is not the way to steer people through it," he said. "The recession was caused by bankers and speculators and the lack of regulation.

"Low-paid public sector workers, who will be helping communities through the recession, shouldn't be expected to pay. At the same time, City bonuses are making a come-back with figures that most workers can't dream of earning in a lifetime. That is wrong. Let's have some fairness."

Vince Cable, the Liberal Democrat Treasury spokesman, agreed that there would have to be "severe restraint", but that an "absolute across-the-board freeze" would not make much sense. He suggested that restraint should begin with the scrapping of bonuses for highly paid public employees.

"It's absolutely ridiculous that people at the top end of the Civil Service, in the current public finance environment, two-thirds of them are being paid bonuses over and above their salaries," he told Sky News.

His remarks followed claims in The Sunday Times that the deputy director general of the BBC, Mark Byford, has accumulated a pension pot of almost £8m, giving him an income for life of at least £229,500 a year. Alan Yentob, the BBC's creative director, would get an income of £216,667 from his £6.3m pot. The BBC said the figures were "wrong and wildly exaggerated".

The scale of the problems was underlined yesterday by the former prime minister, Sir John Major, who said that even if the richest were paying 50 per cent tax, the basic rate of income tax went up 5p, and VAT went up to 20 per cent, it still would not be enough to sort out the Government's finances.

Pension pots: Bonanza at the BBC

£216,667 pa: Alan Yentob, 62

Creative director of the BBC. He joined as a trainee in 1968. Has held his present job since June 2004.

£229,500 pa; Mark Byford, 51

deputy director general of the BBC. He joined in 1979, aged 20, as a "temporary holiday relief assistant".