Public sector unions demand 5% pay rise

The Chancellor's insistence on a public sector pay limit of 2 per cent yesterday faced a serious challenge from Britain's biggest bargaining group.

Leaders of 1.3 million local government workers submitted a 5 per cent wage claim and warned of industrial action if Gordon Brown attempted to impose his "artificial, unrealistic and foolish" pay curb. The demand, covering employees including care assistants, cleaners, teaching assistants, librarians and refuse collectors, would cost the public purse an estimated £1.5bn and could have serious implications for government borrowing. It would also have an impact on companies like Capita, ISS and Carillion with large local authority contracts.

The wage claim was launched as official statistics showed that average earnings throughout the economy increased by 4 per cent in the year to December.

Leaders of Unison, the Transport & General (T&G) and the GMB unions, jointly submitted the claim which would give employees a 5 per cent rise or an extra £1,000, whichever was greater, giving a minimum rate of £6.30 an hour.

Unions are also demanding an extra day of holiday and a two-hour reduction in the working week to 35 hours.