A 1% limit to public sector pay increases will be extended to 2015/16, chancellor George Osborne has confirmed in the latest budget announcement.

Lengthening the limitations for a further year, Osborne added automatic pay increases for those rising up the pay ladder under ‘progression pay' would also be targeted.

The chancellor said progression pay remains ‘difficult to justify when the majority in the public sector and millions in the private sector have seen a pay cut.'

The single tier pension will be bought forward to 2016 in order to support the lower paid and self-employed, the chancellor said. Once this is introduced, public sector employees will be paying a greater amount of national insurance than at current levels and in turn receive a larger state pension.

Once the single tier pension is introduced, a 40 year old could be paying an additional £6,000 in national insurance until retirement and receive an extra £24,000 in state pension, the chancellor said.

‘That's a fair deal and it's a progressive pension reform,' Osborne said.

A report from the Office for National Statistics today reveals average weekly earnings, excluding bonus payments, rose by 1.2% from November to January in comparison with the same period in 2011/12.

Annual growth in earnings remains lower than the 1.3% rise reported from October to December 2012, the report finds, while the real value of pay was lower than inflation of 2.7% during the year following January 2013.

Earlier this week, trade union Unison called on the Government to end the three-year local government pay freeze, saying that local government pay is ‘the lowest in the public sector' and ‘over two thirds of staff fall below the Government low pay threshold of £21,000 per annum'.