Libor fines cash goes to military charity as services pay protected

George Osborne said the Government would be taking action on “progression pay” a system in parts of the public sector means that some people have been receiving salary rises of seven per cent.

However, Mr Osborne also promised that serving men and women in the forces would not be included in the review.

Mr Osborne told the Commons the Government would be looking to make “substantial savings” on progression pay in the next Government spending review.

“I think they are difficult to justify when others in the public sector, and millions more in the private sector, have seen pay frozen or even cut.”

The Chancellor also pledged to accept the recommendation from the Armed Forces Pay Review Bodies that the so-called X Factor payment should go up.

The X Factor payment is a supplement that recognises the different demands on soldiers, sailors and airmen from comparable civilian jobs.

Speaking on the 10th anniversary of the start of the Iraq War Mr Osborne said: “The awarding of a posthumous Victoria Cross to Lance Corporal James Ashworth this week reminds us of the courage and sacrifice that all who serve in our armed forces are still making to defend our country.”

The Chancellor also revealed that fines levied over the way the key inter-bank lending rate known as Libor was manipulated would help military veterans and their families.

Money from the fines will be given to the charity Combat Stress and will be used to fund Christmas boxes for troops on operations.

“Those who have paid fines in our financial sector because they demonstrated the very worst values are paying to support those in our armed forces who demonstrate the very best of British values,” Mr Osborne said.

Andrew Cameron, chief executive of Combat Stress, said: “Combat Stress is delighted that veterans will benefit from the Libor fines money.”

The charity said it would be spending £2m over the next three years to employ specially trained psychiatric community nurses.

A further £200,000 will be put towards the funding of the charity’s 24 hour helpline