The head of the NHS has warned that the 1% cap demanded by Chancellor Alastair Darling would be treated as a maximum rise and not an entitlement as pay negotiations loom large with union bosses.
Chief executive Sir David Nicholson told a parliamentary committee that some NHS workers would fall foul of the 1% cap announced in last month's pre-budget report, adding that there would be a "trade off" between pay and jobs as the health service enters "extraordinarily challenging" conditions over the next two years.
Sir David, who last year announced that the NHS would have to save £15-20 billion over three years, said unions would have to concede that pay cuts were inevitable if job losses were to be avoided.
Commenting on the 1% pay limit, Sir David said: "That is a pay cap. It is not meant to be what the settlement is. Clearly, we will be negotiating and discussing hard with the trade unions to see what we can get for the NHS as a whole.
"We see that as a pay cap, not as a right for everybody."
Sir David said he expects the service's overall budget to remain the same over the next three years prompting calls for the service to make savings wherever possible as the UK economy continues to labour out of recession.