Public sector workers will see their pay rises capped by the Government for two years following the end of the two-year pay freeze.
In his autumn statement, the Chancellor, George Osborne, has said that "the country cannot afford the 2% rise assumed by some governement departments" after the end of the pay freeze (which is April 2013 for most, but April 2012 for some departments).
He has therefore imposed a cap, with public sector pay awards worth an average 1% for the two years following the pay freeze.
And in a move set to anger public sector workers and their unions further, he urged them to call off tomorrow's strike over pension reforms, saying that "it is hard to imagine a better deal than this".
The Chancellor also announced that the independent pay review bodies will be asked to consider how public sector pay can be more responsive to local labour markets, reporting back by next July.
Full details of the Chancellor's statement can be found on the HM Treasury website.