Salaries: Ministers agree to 5pc pay cut

Downing Street said the ministerial pay cut would be followed by a pay freeze for the rest of the Parliament.

For David Cameron, the cut means he will receive a salary of 142,500 – 7,500 less than the 150,000 Gordon Brown was receiving when he left office.

The salaries for other Cabinet Ministers will be cut from 141,647 to 134,565, while the pay for a junior Minister in the Commons will be reduced from 94,142 to 89,435.

No 10 estimates that the reductions will save 300,000 this year and around 3m over the lifetime of the Parliament.

Following yesterday's Cabinet meeting, Mr Cameron addressed No 10 staff, remarking that he had been told his relationship with Mr Clegg was rather better than that between Tony Blair and Gordon Brown. He agreed, but added: "But that's not setting the bar very high."

No 10 later issued a seating plan of the meeting showing that Mr Clegg had been placed directly opposite Mr Cameron, flanked by Mr Osborne and Justice Secretary Ken Clarke.

Mr Cameron was flanked by by Foreign Secretary William Hague to the

left and Cabinet Secretary Sir Gus O'Donnell to the right.

Ministers were urged by Mr Cameron and Mr Clegg to keep any differences which arise between them private.

The Prime Minister and Deputy Prime Minister will chair a new Coalition Committee to resolve any disputes.

Senior Lib Dem Andrew Stunell, who was part of the team that negotiated the coalition deal, said being involved in the talks was like being "a scuba diver in the shark tank".

He said: "We have got to be realistic about this, obviously it had its moments, I think we could say, but the negotiations have produced a very strong agreement."