UNIONS intensified their threat of industrial action today after the government confirmed a “divide and rule” pay freeze for millions of public-sector workers.

In his spending review, Chancellor Rishi Sunak announced that nurses, doctors and other NHS workers will get a pay rise next year.

But the Chancellor “paused” increases for other public-sector workers such as firefighters, teachers, teaching assistants, civil servants, refuse collectors, council workers and government agency staff.

TUC general secretary Frances O’Grady described the pay freeze as a “kick in the teeth” for the workers who kept Britain running during the pandemic.

Mr Sunak added that the lowest-paid public-sector staff – about two million people earning less than £24,000 – would have their pay increased by at least £250 a year. Unite assistant general secretary Gail Cartmail described it as an “insulting” amount.

The Chancellor said that the coronavirus crisis will lead the economy to shrink by its largest amount for 300 years, and push government borrowing to levels previously unseen in peacetime.

He also warned warned that there would be lasting damage, with the economy shrinking by 11.3 per cent in 2020 and likely not recovering to pre-crisis levels until the end of 2022.

Attempting to justify the pay freeze for non-NHS public-sector workers, Mr Sunak said that private-sector wages had fallen by nearly 1 per cent in the six months to September while public-sector wages had risen by nearly 4 per cent.

GMB national officer Rehana Azam said: “This attempt to divide and rule will put [the Chancellor] on a direct collision course with public-service workers. He should know that we fought the public-sector pay cap before, and we busted it.”

Mark Serwotka, general secretary of the Public and Commercial Services union, said there will be “a deep sense of betrayal” over the pay freeze and that it has “increased the likelihood of industrial unrest in the public sector.”

Transport union RMT general secretary Mick Cash likewise accused the government of “employing a policy of divide and rule of private and public key workers.”

He said that the union had not ruled out industrial action. 

Dave Prentis, general secretary of public-sector union Unison, warned that pay “austerity” would sour relations with essential workers and would damage the economy in the long run by depriving people of disposable income.

Shadow chancellor Anneliese Dodds said that Mr Sunak’s announcement “takes a sledgehammer to consumer confidence.”

“Many key workers who willingly took on so much responsibility during this crisis are now being forced to tighten their belts,” she said.

Ms Dodds also contrasted the pay freeze with the “bonanza” paid to connected firms who won — then failed to deliver on — billions of pounds’ worth of government contracts during the pandemic.

Unions have also expressed serious concerns over the slashing of a proposed 5.6 per cent rise in the so-called national living wage (NLW).

Mr Sunak confirmed that the wage — a rebranded national minimum wage for all over-25s — will increase by 2.2 per cent to £8.91 an hour from April 2021. It will also be extended to 23 and 24-year-olds for the first time. 

But the wage had previously been expected to increase to as much as £9.21, as was recommended by the Low Pay Commission. 

Retail workers’ union Usdaw pointed out that the increase does not meet its long-standing call for a £10-an-hour minimum wage.

General secretary Paddy Lillis said the reduction of the qualifying age for NLW to 23 is a step in the right direction, but he was “disappointed” that “rip-off” lower pay rates for people aged under 23 will continue.

He also reiterated his call for the temporary £20-a-week increase in universal credit, introduced at the start of the pandemic, to be extended past next April.