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CBI calls for public sector wage freeze

In a drawing up of battle lines between businesses and the unions the CBI has today called for public sector wages to be frozen for the next two years. While appreciating that those at the lower end of the income scale may struggle to survive, the CBI believes we could see a situation where low-paid workers receive pay rises while the overall bill for the UK public sector remains steady. So will David Cameron take heed?

While there's no doubt that David Cameron has already pencilled in a number of public-sector investment cuts in the short to medium term he has already announced a cut in civil-service bonuses and a wide-ranging inquiry into civil service pay. On the flipside of the coin, UK unions have stepped forward to suggest that pay freezes in the public sector could hit the UK economic recovery and turn the country back towards recession.

It is likely that David Cameron will take action on public-sector pay rises but an outright ban on all pay rises over two years looks unlikely as does the continuation of the system at the moment. The new government will need to find some middle ground to keep the unions as happy as possible while also allowing those at the lower end of the income scale to avoid a reduction in their spending power in real terms.

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