GEORGE Osborne has effectively handed hundreds of thousands of public sector workers in Scotland a pay cut, after capping wage rises at just one per cent a year until the end of the decade.

There were fresh warnings last night that Britain could be hit with years of industrial action, with his announcement following years of stagnation in pay for the estimated 546,800 strong workforce north of the border including teachers, NHS staff, police and council workers.

The maximum rise compares with forecasts from the Office for Budget Responsibility which said yesterday that it expects inflation to steadily rise over the next four years, hitting 1.6 per cent in 2017 and two per cent by 2020, leaving public sector workers with have less cash in their pockets if the estimates prove accurate.

While the Scottish Government could step in to boost pay packets, it will have to find the cash itself for any rises over and above what is offered at a UK level. Public sector workers, like all employees, will benefit from the National Living Wage also announced yesterday, although the vast majority will already receive more than the £7.20 an hour minimum coming into force in April.

Announcing the pay cap, George Osborne said: "I know there has already been a period of restraint, but we said last autumn that we would need to find commensurate savings in this Parliament. So to ensure we have public services we can afford, and protect more jobs, we will continue recent public sector pay awards with a rise of one per cent per year for the next four years. Mr Deputy Speaker, public spending should reflect public priorities - and we have to make choices."

The move, which follows a public sector pay freeze imposed in the first years of the 2010 parliament, sparked anger from unions with claims that the chancellor was excluding public sector workers from the economic recovery.

Grahame Smith, General Secretary of the Scottish Trades Union Congress, said: "Despite the statement that Britain deserves a pay rise, this will not be the case for many low paid public sector workers with the continuation of a public sector pay cap. This is another kick in the teeth for hard working public service workers."

The FDA union, which represents senior civil servants, said that public servants were taking home less pay than they were in 2010 despite being tasked with delivering billions in spending cuts. Dave Penman, the FDA's general secretary, said: "A further four years of pay restraint will do nothing to help recruit, reward and motivate the greatest asset the government has: the people who deliver public services. The chancellor said today that 'Britain deserves a pay rise and Britain is getting a pay rise'. Unless, of course, you're a public servant."

The Scottish Government said it had a record of seeking to offer far pay settlements, but offered no guarantee that it would go beyond one per cent.

A spokeswoman said: "In recent years we have gone beyond the UK Government with a guarantee of a meaningful living wage alongside the one per cent base pay award, the opportunity of further pay progression, and those staff earning under £21,000 receiving a minimum of £300 pay rise.

"In addition, we have honoured the independent pay settlement for NHS staff who also received a one per cent consolidated pay uplift, putting NHS employees on the highest comparable rates in the UK."

Meanwhile, anti-cuts groups pelted Downing Street with balls in protest against austerity following the Budget statement. The protesters, who are opposed to cuts to disability services and tax credits, then marched to Westminster Bridge, where they brought traffic to a standstill.

The group, which included supporters of organisations Disabled People Against Cuts, Unite and Unison, moved only to allow emergency vehicles through, causing a huge backlog of queues. Scotland Yard said that four arrests had been made .

The protesters were persuaded to move to Parliament Square, but they again blocked the road with a huge banner bearing their slogan #ballstothebudget.