Ministers and MPs are to receive a two per cent pay increase in line with inflation, it has been announced.

The change, which will come into force from April, will increase the prime minister's salary from £175,414 to £178,922 a year, while the rest of the Cabinet will see an increase in their annual pay from £127,791 to £130,347.

It follows a recommendation from Senior Salaries Review Board.

Although the move matches the rise for most civil servants, judges will see their salaries rise by 2.5 per cent, while senior military officers will receive 2.8 per cent pay increases.

Performance-related pay

However, the issue receiving most attention from MPs has been the performance-related bonuses of up to nine per cent this year for senior civil servants.

Officials who perform badly will receive a "real terms pay cut" as they receive no pay increase.

Speaking in the Commons, Liberal Democrat spokesman Paul Tyler argued that the performance-related aspect should be extended to ministers.

"What will happen, for example, if there's an error of judgement at the highest levels of government?" he asked.

"Will their salaries be docked to take account of that error if, for example, the leader of the house makes a mistake or the prime minister makes a mistake - leads a country to war under false pretences - will his pay be docked to take that into account?"

The decision was defended by Commons leader Peter Hain.

"The senior salaries review board recommended that members' pay is increased, and ministers' is increased, in line with the general inflation rate, which is about two per cent and the government has accepted that," he said.

"I don't know whether he [Paul Tyler] is suggesting that members' pay should be docked on a performance-related basis, and if he performances well or badly at business questions as to whether he will take a docking from his pay.

"But actually, all we're doing is implementing what the house has decided to do. Ministers' pay and members' pay are linked to civil service grades.

"The pay review looked at civil service pay and that is the way it's come out and it's in line with inflation, so I don't think that his argument applies there."

Civil servants want more

Nonetheless the First Division Association, which represents senior civil servants, argued that the increase does not keep their pay in line with those in the private sector.

"Increases of two per cent for many members are extremely disappointing," said general secretary Jonathan Baume.

"This fails to match inflation but will also mean that senior civil service salaries fall further behind other senior posts in the public sector.

"It will do nothing to assist the civil service in its drive to increase mobility between different areas of the public sector.