POLICE, teachers and NHS staff will all see their pay packets increase next year, Derek Mackay has said.

The finance secretary announced he will lift the one per cent public sector pay cap, and usher in a rise of at least three per cent for those earning up to £30,000.

The move will apply to around 260,000 full-time public sector workers in Scotland and ends four years of stagnating pay.

But local authority employees will not be included unless councils foot the bill – sparking claims the Government has “washed its hands” of 144,000 council workers.

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Mr Mackay said calls to end the UK-wide pay cap were “ignored” by Chancellor Philip Hammond, adding: “This limits how far we can go on pay – however, unlike other Governments across the UK, we committed to lifting the pay cap, and lift it we will.

“Today, I have published a progressive pay policy. I can confirm that we will deliver a guaranteed minimum pay increase of three per cent for all public sector workers earning £30,000 or less.”

Those earning above £30,000 will be limited to a two per cent increase, Mr Mackay said, while a cash cap of £1,600 will apply to those earning £80,000 or more.

He added: “Our decision to lift the pay cap will benefit thousands of nurses and other healthcare staff.

“I know I speak for everyone in the chamber when I thank our NHS staff for the work they do in caring for the people of Scotland.”

The move will initially affect 37,000 public sector workers across 44 public bodies – including prison officers and tourism officials – which fall under the control of Scottish ministers.

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But hundreds of thousands of nurses, police officers, firefighters and teachers are also expected to benefit as their pay is aligned with Government policy.

However, councils will have to fund the pay increase themselves if they are to mirror the move.

Scottish Labour finance spokesman James Kelly said this meant Mr Mackay was expecting councils “to deliver a real-terms pay rise when he is slashing their budgets”.

He added: “This is just smoke and mirrors from the SNP. Scotland needs real change, the kind only Scottish Labour can deliver.”

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Scottish conservative councillor Gail Macgregor, resources spokeswoman for Cosla – the national association of Scottish councils – said matching public sector pay would become an issue for local authorities if not fully funded.

She said: “There are serious financial challenges that lie ahead in several areas and there is no doubt that these will have an impact on the essential services that councils deliver.”