Local government unions and employers have dismissed as ‘fantasy' the Institute for Fiscal Studies' (IFS) claim that attempts to protect the public sector's lowest earners from wage squeezes risks widening pay differentials with private sector employers.

According to a research paper issued on 31 January by the renowned IFS, levels of public sector pay will return to where they were, relative to the private sector, before the 2008 recession. IFS researchers said their figures took into account the current pay freeze and forthcoming two years of 1% wage increases imposed by chancellor, George Osborne.