The government has announced that teachers in England and Wales will receive a 2.5 per cent pay rise next year.

Charles Clarke, education secretary, said: "These proposals will provide real stability and certainty for schools. They will help headteachers plan for the future, help restore stability and certainty to school budgets and support the drive to raise standards in our classrooms.

"I welcome today's report from the STRB. They have done an excellent job and provided a good platform on which to proceed. I have made adjustments to the timescale to some of the STRB recommendations. But I agree with their fundamental reform of making September the new date for all future pay awards, as this is the time when most new and existing teachers take up their posts and it will help with planning school budgets.

"I believe my proposals today are fair to teachers and affordable for schools. The Government has ended the times when teachers were underpaid and undervalued and most teachers have a good standard of living. I am, for example, very encouraged by the latest figures on recruitment to teacher training courses in England, which we are also publishing today, which show that recruitment is up by 8 per cent this year, the fourth successive annual rise.

"Teachers will benefit from inflation-led pay rises in addition to their annual increments and allowances. They will have a safety net if for any reason inflation were to veer significantly from what has been projected. And at the same time schools will have headroom to address workforce reforms to raise standards and help ease teacher workload.

"We now stand at the crossroads on performance related pay and the upper pay scale. Today I am writing to invite the pay partners to join with us in the framework discussions urged by the STRB, and to find a better way forward for resolving the outstanding issues around the implementation of the upper pay scale. I recognise that it will be difficult to find agreement but I am determined to succeed and I am heartened by the success of the National Agreement on Workforce Reform."

Forum Response: Association of Teachers and Lecturers

Dr Mary Bousted, general secretary of the ATL, said: "ATL welcomes the STRB report published today. It represents a considerable victory for ATL in persuading the STRB not to impose a quota on the Upper Pay Scale and we are pleased that the STRB has recognised that we have the best generation of teachers in our schools and that excellence is widespread.

"The STRB is clear that negotiation is the way forward to resolve the main issues. We are pleased that the government has the courage to see that engaging in constructive discussion is the best course of action. This is what ATL has always called for.

"We welcome the STRB assertion that pay progression should be on merit and should not disadvantage teachers working in challenging schools.

"The agenda the STRB has now identified is to find a fair and equitable reward system. ATL is very ready to engage in such discussions which will also consider new structures for management allowances. It is a victory for ATL that the STRB has asserted that pay arrangements are intended to reward teachers' professionalism. This ends once and for all the drive towards payment by results.

"We anticipate tough discussions with the government on the Upper Pay Scale progression. Those talks will be underpinned by the essential contribution of the STRB's independent proposals.

"ATL is prepared to fight its case and to negotiate hard for realistic outcomes, fit for the best ever generation of teachers."

Forum Response: National Union of Teachers

Doug McAvoy, general secretary of the NUT, said: "Today's announcement provides a bleak prospect for teachers.

"Again this government offers teachers less than the increases in average earnings. In each of the years since 1997 the increase in teachers' pay has been less than the increase in average earnings.

"Each year since Labour came to power, there has been a cumulative worsening of increases in pay for teachers. Today's decision by the education secretary will ensure further worsening up to September 2006.

"The decision to freeze teachers' pay at inflation will increase the gap with other graduate employees, increase the problems of recruitment and retention which will be used to force schools to use unqualified persons to take whole classes.

"The government's main objective is to reduce the number of teachers and increase the number of unqualified persons taking classes.

"By one route or another this government will ensure teaching on the cheap.

"This offers bleak prospects for teachers as interest rates go up, mortgages go up, average earnings go up but teachers' pay slips further and further behind other employees."

Forum Response: Professional Association of Teachers

Jean Gemmell, general secretary of the PAT, said: "If inflation is more than 2.5 per cent over the next two years, there must be contingency to meet that.

"It would be a complete disaster if there were to be not only such a parsimonious pay increase but also any repeat of the funding crisis, because that could put the Workload Agreement in jeopardy.

"Pay is not the only issue that matters to teachers - the Agreement is essential too.

"At least with a pay deal covering more than one year, schools will have a better idea of where they stand in terms of budgets."