Chancellor George Osborne has hinted that local pay rates will be introduced for some public sector workers.
His annual Budget statement today also announced a string of tax changes affecting those working in the NHS.
Mr Osborne pledged to make “public services more responsive, and help our private sector to grow and create jobs in all parts of the country”. He said government evidence to independent pay review bodies – potentially giving more details of any move to local pay - would be published today.
The chancellor added: “Some departments will have the option of moving to more local pay for those civil servants whose pay freezes end this year.”
In the immediate aftermath of his speech it was unclear how this will affect those working in the health service.
Mr Osborne also pledged to increase the personal tax allowance on pay bills by £1,100 to £9,205 in April 2013, providing some relief particularly to those at the lower end of the health service income scale.
For high earners, he reduced the top rate of income tax from 50% to 45%, starting in April 2013.
There was also help for the private sector with reductions in corporation tax by 1% next year. A series of further falls will leave the rate of corporation tax at 22% in April 2014.
Staying on workforce issues, Mr Osborne pledged to conduct an internal review of the role of employee ownership in supporting growth. This would conclude in advance of the 2012 autumn statement. It was immediately unclear if this will impact on health service workers.
The Budget would be fiscally neutral, the chancellor said. However, there will be intensifying resource constraints across government departments.
The full Budget paper restated forecasts of average real reductions in government department expenditure limits. The size of the falls would increase from an average of 2.3% a year in the Spending Review 2010 period to 3.8% a year in 2015-16 and 2016-17, unless action was taken to curb the potential for welfare spending to rise.
There will be £10bn further reductions in welfare spending by 2016.
Mr Osborne confirmed a white paper on social care would be published, but he gave no date for this. Although this had been billed for late spring, there has been speculation it will be delayed until the autumn.
There would be an “automatic review of the state pension age to ensure it keeps pace with increases in longevity”, he said. Further details will be given alongside the Office of Budget Responsibility’s fiscal sustainability report this summer.
On public health, Mr Osborne said the government would soon publish its alcohol strategy “to address the growing problem of alcohol abuse, and the many billions of pounds it costs our NHS and criminal justice system”. But there would be no immediate changes on duty today, with there being no mention of minimum alcohol prices.
Tobacco duty will rise by 5% above inflation, an increase of 37p per packet of cigarettes, from 6pm.
Royal College of Nursing chief executive and general secretary Peter Carter said: “Nurses were looking for a silver lining in this Budget but they are unlikely to find it.
“The rising cost of petrol, a two year pay freeze, and an attack on their pensions are all making nurses feel the pinch every day. We do welcome the rise in personal allowances but we will fiercely resist any move away from national pay rates for nursing staff,” he said.
“Introducing regional pay would only serve to drive down pay in certain areas and lead to damaging competition between Trusts. Ultimately it is patients who would suffer.”
Unison general secretary Dave Prentis said: “Far from encouraging economic growth, the Chancellors’ policies are sucking demand out of the economy. Public sector workers are being hit with a pay freeze again this year and now the government are proposing local pay which mean £1.7bn would be lost from the economy.
“Taking money out of the pockets of hard working people will starve local shops, cafes and businesses out of much needed revenue sending the economy further downwards.”