The Treasury has denied that the £3.3bn annual savings expected from the public sector pay freeze are threatened by behind the scenes wages rises for staff.
The FT reports today that many workers have been enjoying "substantial" and "disguised" pay rises because they are entitled to increments, known as pay progression, moving them up their pay scales.
The increases, in the NHS, local government and a number of Whitehall departments, range between 2 and 5 per cent.
But, according to the Treasury, it was always envisaged that staff would receive these increases, which they were entitled to under their terms of employment.
My understanding is that axing the pay rises was thought to be a pointless exercise, because it would have resulted in complicated and costly appeals.
This wasn't mentioned in George Osborne's June 2010 budget speech when he said he was "asking the public sector to accept a two-year pay freeze".
However, he did say in 2011's Autumn Statement, when announcing that rises would be restricted to 1 per cent for a further two years, that:
"Many are helped by pay progression - the annual increases in salary grades that many people are entitled to, even when pay is frozen."
He added that pay progression was one of the reasons why public sector pay has risen at twice the rate of private sector pay in recent years.
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