Documents released under the Freedom of Information Act (FoI) show civil servants in the Treasury told the former Chancellor the move would make it harder for the Government to hit legal targets to reduce child poverty.
They warned low paid workers would find it more difficult to afford essential goods and that it could have a “negative impact” on family relationships.
The then chancellor angered unions with his announcement in his 2015 Budget that he was extending the 1% pay cap on public sector workers for another four years.
A ministerial decision record obtained by the GMB union through FoI shows he was advised by officials that the move meant public sector workers’ take-home pay was unlikely to keep pace with inflation.
“This could increase financial pressure on families of public sector workers which may have a negative impact on family relationships,” the document states.
“This policy will make it more difficult for low-income families with children to access essential goods and will therefore make it harder for the Government to hit Child Poverty Act targets.”
It goes on to advise that the impact could be “mitigated” by putting in place protections for the low paid or increasing the national minimum wage.
In the event, Osborne did announce the creation of the “national living wage” of £7.20 an hour, rising to £9 by 2020, to replace the £6.50 minimum wage.
GMB national secretary Rehana Azam said the document was a “mark of shame” for ministers.
She warned the union would fight “tooth and nail” against any attempt by Osborne’s successor, Philip Hammond, to further restrain pay through the introduction of regional public sector pay rates.
“The public sector pay pinch has had a devastating impact on our members for many years,” she said.
“Public sector workers have been forced to leave their homes, use food banks and many of our members are unable to fund basic necessities for their children such as an annual holiday.
“This damning document is a mark of shame on ministers who imposed years of real-terms pay cuts in the full knowledge that it would condemn families and children to poverty.”
Osborne, who is now editor of the London Evening Standard, told the BBC: “The Treasury advice was clear that introducing the living wage would help protect the low paid from necessary savings in public spending.
“Official data on wages over the last couple of years shows clearly that the protection worked and the wages of the lowest paid have risen fastest.”