And he has ruled out cuts in spending on health, welfare or public-sector pay.
He announced that public sector pay rises are to be capped at 1% for two years.
Big cuts in public-sector pay and allowances have been pushed through in Ireland, Spain and Greece.
Moreover, increased private-sector pay might be offset by longer hours, higher health care costs, and even higher taxes.
Shadow business secretary Ken Clarke said public sector pay had to reflect "the current low level of inflation".
Mr Osborne said that public sector pay would be limited to an average of 1% including in 2015-16.
Chancellor George Osborne said in his first Budget speech there would be a two-year public sector pay freeze.
They can use a public sector pay freeze to achieve part of that.
And he suggested a public sector pay freeze of up to three years.
Public-sector pay is being cut by 5% and taxes are being cranked up.
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Firefighters do come quite low down in the public-sector pay league (see chart).
Like much of the Budget, the chancellor's decision to press ahead with local public sector pay bargaining was heavily leaked.
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Mr Lambert says the government should instead take "a serious look" at reducing both public services and public sector pay.
But the clincher is that public-sector pay is high and the quality of public services is among the worst in Europe.
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Lots of states, faced with swelling pension and health-care costs and yawning deficits, are seeking to curb public-sector pay and benefits.
And Mr Reichstul worries that public-sector pay restraint will mean that his best staff are poached by foreign firms in Brazil.
But planned reforms of public spending have yet to bite, and the government has been timid in conceding higher public-sector pay.
Unfortunately, public-sector pay restraint may be a little too arcane, and bust-ups with unions too familiar, to work as reputation-forming decisions.
The 1% pay rise limit was put in place for two years in the Autumn statement, after a public sector pay freeze.
It wants radical reform of public-sector pay, which at the moment is fixed by Congress without regard to performance or economic conditions.
Mr Brown has ordered a review of senior public sector pay by the Senior Salaries Review Body to report by the Spring.
Some people argue that when there is a public sector pay freeze it is wrong to be helping the richest in society.
While ruling out "a complete free-for-all" on public sector pay, the authors claim greater flexibility in wage rates would improve work standards.
With the prefect and television programmes from mainland France come mainland social-security payments and minimum wage indeed state-sector pay 40% above mainland levels.
The answer, in a nutshell, is public sector pay and tax revenues.
Fixing public-sector pay centrally is never going to work very well, though.
He added that frontline services would be protected, while the end of public sector pay freeze next year has also been factored in.
The president of the RMT union, Alex Gordon, says Mr Balls's decision to back the public sector pay freeze will cost Labour votes.
To boost competitiveness and growth, as well as improve the budget, it must embrace radical tax changes, cuts in public-sector pay and pension reforms.
The Liberal Democrats say the expected increase in council tax sits uncomfortably alongside the government's insistence on limiting public sector pay increases to 2%.
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