Unions say millions of public sector workers are being “taken for granted” after being given a 1% pay rise.
NHS staff, doctors, dentists and armed forces personnel will receive an average 1% increase in basic pay in 2017-8 after ministers accepted the recommendations of pay review bodies.
Ministers urged a below inflation deal to “help repair the public finances”.
But Unison said seven years of pay freezes and caps were demoralising workers and harming recruitment.
The pay awards have also been accepted by the Scottish and Welsh Governments. But the devolved administrations in Edinburgh and Cardiff have said there will be extra help for thousands of the lowest-paid workers.
The rate of inflation, as measured by the CPI index, rose to 2.3% this month, above the Bank of England’s target. The Bank of England has said it expects inflation will peak at 2.8% next year, although some economists think the rate could rise above 3%.
The Treasury said continuing wage restraint in the public sector, which also applies to Northern Ireland, would help protect an estimated 200,000 jobs.
“The settlement for these key workforces protects jobs and helps repair the public finances,” said Chief Secretary David Gauke.
The Armed Forces’ Pay Review Body, the NHS Pay Review Body and the Doctors’ and Dentists’ Remuneration Body made the recommendations which are in line with the UK government’s policy of a 1% pay cap for key workers until 2019-2020.
But the NHS Pay Review Body said the pay policy was coming “under stress” with shortages of staff in certain sectors and areas of the country.
“Our judgement is that we are approaching the point when the current pay policy will require some modification, and greater flexibility, within the NHS,” it said.
Unions said the pay bodies’ hands had been effectively tied and Labour said the pay offer was “totally self-defeating and unsustainable”.
“The pay of top judges and MPs has already breached the government’s 1% limit,” said Unison general secretary Dave Prentis. “It’s high time ministers stopped penalising NHS employees and gave them a decent pay rise.”
Asked whether Theresa May thought it fair for MPs to enjoy a 1.4% pay rise to £76,011 next week, at a time when public sector workers were limited to 1%, the prime minister’s official spokesman said both increases were determined independently.
“These are all put forward by independent pay review bodies,” he said.