Chancellor Alistair Darling has also announced the NHS will receive a real-terms funding increase from 2011.
'Public sector workers will make a greater contribution to the increasing value of pensions, with those earning over £100,000 paying more,' he said.
Earlier this week the Daily Mail reported that GPs earning over £150,000 would have to write to the secretary of state for approval, although today Mr Darling said this would only apply to ‘new government appointments', in the public sector.
Mr Darling's final pre-budget report before the election mentioned cuts to government IT projects, which is expected to mean a scaling back of the electronic patient record.
RCN chief executive and general secretary Dr Peter Carter said: ‘We were pleased to hear that the government has listened to the RCN's calls to protect frontline services, which directly impact on patient care.
'Nurses and healthcare assistants will be concerned by the proposed cap on pay rises. However, the RCN remains committed to defending our members' jobs and ensuring they are appropriately paid, as well as ensuring patients get the high quality care they deserve. Nurses live in the real world and realise that pay rises are difficult in the current tough economic climate. We hope the government has learnt from previous mistakes that ruthless job cuts cause patient care to suffer.
NHS Confederation chief executive Steve Barnett said: 'Everyone working in the NHS understands the part they have to play in helping the country through an economic downturn.
'As expected the chancellor has confirmed that spending on the NHS will continue to rise in line with inflation after 2011 and this is welcome, but the rising cost of providing healthcare means there are real challenges ahead.
'An aging population, rising demand particularly in emergency and urgent care, advances in medicines and medical procedures and a greater expectation of what the health service can deliver mean that there will still be a real pressure on budgets.
'The NHS Confederation has already said that savings and efficiencies of between £15-20bn need to be found in the NHS in the next five years and today's announcement only serves to confirm the scale of the challenge which lies ahead.
'Given this context the announcement of a 1% cap on public sector pay settlements in 2011/2 and 2012/3 is hardly surprising but any changes need to be carefully managed to avoid creating shortages of trained staff or disruption of services.'
