The Cabinet Office has confirmed that it has reached a three year licencing deal with Microsoft for its upcoming Public Sector Agreement 2012 (PSA12).

The government's current PSA09 deal with Microsoft, which sets discounted licencing prices for the public sector, is due to come to an end on 30 June 2012.

The news comes shortly after Microsoft revealed that it will increase volume licencing prices in the UK by an average of 29 percent to adjust for the 'sustained currency differences between European countries'.

UK businesses have until 1 July to place their orders under the current prices before the changes take effect.

Microsoft claimed that because of sustained differences between the British pound and the euro, price spikes are necessary to maintain consistency across the region.

However, the UK public sector, under the PSA12, will see much smaller price increases. These will equate to a one percent increase on PSA09 pricing, taking effect from 1st July 2012, and an inflation uplift based on the Office of National Statistics Consumer Price Index occurring every year on 1 April up until 2015.

"We can confirm that Microsoft and Cabinet Office have signed a new three-year licensing framework for all eligible UK public sector organisations," said a Cabinet Office spokesperson.

"The framework fully supports the government's goals of reducing expenditure while at the same time transforming public services through the adoption of new technologies."

Government will still benefit from the following discounts on the following Microsoft licences:

40 percent price discount on New Enterprise Agreements (EA)50 percent price discount on Subscription Enterprise Agreements10 percent price discount on Select Agreements22.6 percent price discount on Renewal Enterprise Agreements