One of the key issues that the Chancellor must address in today’s public spending review is pay. More than a quarter of all public spending goes on wages, which rose sharply during the Labour years. The coalition has talked tough on pay, curbing increases and seeking to introduce more flexibility. But there is much farther to go.

Historically, pay in the public sector tended to be lower than in the private sector and this was partly offset by more generous pensions. By the time of the last election this was no longer the case. According to the Office for National Statistics, public sector employees were paid an average of 7.8 per cent more than their private sector counterparts in 2010 while public sector pensions were