The federal government has announced a more generous pay offer for defence force personnel, lifting last year’s below inflation offer of 1.5 per cent to 2 per cent.

Defence Minister Kevin Andrews made the announcement on Tuesday morning, and said he would be asking the Defence Tribunal to increase their previous offer.

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The move comes after heavy criticism from crossbench senator Jacqui Lambie, who vowed to vote down all government legislation until a more generous pay offer was made.

“The families and veterans are grateful for the 0.5 per cent that he’s given them but effectively he has stolen a full 1 per cent off them,” Ms Lambie told The Guardian in response to the announcement.

“So I can tell you now I think, as one veteran put it to me over the phone, done it once and now he’s done it twice,” she said.

“If he was thinking it was going to help his stance as the PM and the Liberal Party and the National Party, then I think this is about to come back to bite him.”

The pay offer will now see defence pay increase at a rate higher than inflation, which is currently 1.7 per cent.

Prime Minister Tony Abbott said the move would cost $200 million over four years.

He called it a “modest catch up”.

“It is still frugal government, if I may say so, but it is frugal government that acknowledges the special place the defence forces have,” Mr Abbott said.

“This is a modest catch-up, if you like, as well as an acknowledgement of the special compact between the Australian people and those who wear our uniform.”

Advocates for members of the defence force condemned the previous annual 1.5 per cent pay increase, with National president of the Defence Force Welfare Association, David Jamison, calling it “insultingly low”.