Controversial plans for regional pay rates in the public sector will not go ahead, although workers will face below-inflation wage rises, the Chancellor has announced.
George Osborne said national pay arrangements in NHS and prison service will continue and there will be no changes to civil service arrangements. But schools will be given greater freedom to set pay in line with performance.
The Government said it had accepted recommendations from pay review bodies not to press ahead with regional pay.
The Chancellor had asked the review bodies to consider the move amid suggestions that in some parts of the country, public sector pay rates which were set at national level, were adversely affecting wages in private firms.
In his Autumn Statement, Mr Osborne also confirmed that public sector workers whose pay has been frozen will receive a 1% rise from next April.
Unison leader Dave Prentis said: "The Chancellor's autumn statement is more bad news for the public services that millions of people rely on every day.
"He is piling on the pay pain for millions of public sector workers. A 1% increase on the heels of a freeze that has cut pay in real terms by 15%, is another blow for hard working public service workers and their families.
"Public services including the NHS, schools and higher education, council services for young and old alike are all under the Chancellor's cosh. He has failed to deliver on his growth targets and in getting the country out of recession and people across the country are suffering as a result.
"By targeting the public sector for sustained cuts he is also hitting the private sector. Public sector workers and their families have been hard hit by the pay freeze and 1% would mean less money to spend in their local shops and businesses, strangling growth and damaging further the chance of economic recovery."
The Treasury said in a document released after Mr Osborne's speech: "The Government has today published the reports of the independent Pay Review Bodies on local pay and intends to accept their recommendations, including that there should be no new centrally determined local pay rates or zones, but that there should be greater use of existing flexibilities."