The Independent Parliamentary Standards Authority (Ipsa) said the issue of politicians’ salaries could no longer be “ducked” and it is pushing ahead with the increase from £67,060 to £74,000.
However, the watchdog has climbed down on plans to link their pay to UK-wide average earnings in future - a move that could have left MPs £23,000 better off by 2020.
Instead they will be restricted to average rises in the public sector.
The Prime Minister previously branded the substantial boost, backdated to May 8 and tied to cuts in pensions and expenses, “unacceptable” at a time of austerity.
But last month Downing Street indicated that Mr Cameron will not seek to block the move - and he will personally accept the money. Politicians elected before 2015 - including Mr Cameron - will also see a major boost to their pensions as they are based on final salary.
The proposals have caused bitter divisions among MPs, with some decrying the award and others arguing they have been underpaid for decades.
It has also split ministers, with Education Secretary Nicky Morgan breaking ranks to declare she will give the money to charity and International Development Secretary Justine Greening warning that Ipsa is “not working in its current form”.
Labour leadership contenders Andy Burnham, Yvette Cooper and Liz Kendall have all declared they will forego the rise.
Foreign Secretary Philip Hammond is likely to be reminded of comments from 2013 when he indicated he would not accept a pay rise while the rest of the public sector was being restrained.
Michael Gove, now Justice Secretary, memorably declared around the same time that Ipsa could “stick” their pay rise.
Under pressure, the Government formally expressed its opposition to an increase in a letter to the watchdog’s final consultation on the plans last month.
Mr Cameron has also imposed a freeze on the ministerial element of pay - meaning he and Cabinet ministers will only get an effective 5% bump in their total remuneration.
However, blocking a rise finalised by Ipsa would require a change in the law, and with a slim majority it is far from clear that Mr Cameron could carry a vote in the Commons.
The hike was originally unveiled in 2013 to address complaints that MPs’ pay has dropped behind that for other jobs.
Ipsa said last month that the mooted rise would go ahead unless “new and compelling evidence” was submitted.
In its report today, the watchdog said the additional four years of 1% public sector pay restrictions unveiled by Chancellor George Osborne in the Summer Budget represented “compelling evidence”.
It said MPs’ salaries would now go up every April in line with average weekly public sector earnings, rather than those for the whole workforce.
UK wage earnings on the rise
OBR forecasts show UK-wide average earnings going up 3.6% in 2016, 3.9% in 2017, 3.9% in 2018, and 4.1% in 2019, and 4.4% in 2020.
On top of the £7,000 bump this year, that would have left MPs receiving nearly £90,000 in 2020 - a rise of £23,000 or 34% over five years.
By contrast public sector earnings are only expected to go up by around 5% over the period.
The measure being used by Ipsa has also fallen into negative territory in the past as a result of job cuts - and the watchdog’s report stated: “If these data show that public sector earnings have in fact fallen, then MPs’ pay will be cut too.”
The watchdog’s chairman Sir Ian Kennedy defended the salary increase, pointing to other curbs such as introducing a career average pension and scrapping expenses for evening meals. “Pay has been an issue which has been ducked for decades, with independent reports and recommendations from experts ignored, and MPs’ salaries supplemented by an opaque and discredited system of allowances,” he said.
“We have made the necessary break with the past. We have created a new and transparent scheme of business costs and expenses, introduced a less generous pension scheme, where taxpayers contribute less and MPs make a higher contribution, and scrapped large resettlement payments.
“We have consulted extensively on MPs’ pay, and with today’s decision we have put in place the final element of the package for the new Parliament.
“In making this decision we are very aware of the strongly held views of many members of the public and by some MPs themselves.
“We have listened to those views. We have made an important change to the way in which pay will be adjusted annually.
“Instead of linking MPs’ pay to wages in the whole economy, it will be linked to public sector pay.
“Over the last Parliament, MPs’ pay increased by 2%, compared to 5% in the public sector and 10% in the whole economy.
“It is right that we make this one-off increase and then formally link MPs’ pay to public sector pay.”
Mr Cameron’s official spokeswoman declined to say what the PM would do with any pay rise awarded by Ipsa, but said that the body was setting MPs’ pay and “the Prime Minister is an MP”.
The spokeswoman told a Westminster media briefing: “As you know, the PM has consistently throughout this consultation process opposed the pay increase that Ipsa had been considering.”
Asked whether a big rise for MPs could be justified at a time when ministers are imposing pay restraint on the public sector, the spokeswoman said: “It is the Government that makes the decision on public sector pay. It is Ipsa that makes the decision on MPs’ pay.”
Ipsa has made clear the extra money will be paid to MPs automatically, but they are free to give sums to charity.
The watchdog operates a payroll giving scheme that allows them to donate to charity from gross salary.
According to the Ipsa report, a number of MPs wrote in to support the pay rise.
They included Foreign Office Minister Tobias Ellwood, who said: “I know I speak for the silent majority (who are not millionaires) to say this increase is well overdue... I hope common sense will prevail and this pay rise will be honoured.”
Labour MP and Home Affairs Select Committee chairman Keith Vaz said: “ I am supporting Ipsa’s recommendations as they have been done independently of members.”
Tory Mark Field insisted: “Ipsa ... must work totally free from government influence.”
Rory Stewart, Conservative chair of the defence select committee, wrote: “In my view Ipsa was established precisely to take away the responsibility of this sort of decision from the hands of MPs...
“MPs were traditionally unpaid. And parliament predicted when salaries were introduced that it would be a source of continual public disappointment and anger, as it has been...
“My fundamental conclusion is that an independent body such as Ipsa is now and should be in the future the appropriate body to make recommendations - not MPs themselves.
“I believe Ipsa has conducted serious research and comparisons. I believe they are in a better position than MPs to be objective. I would accept their recommendation.”
However, Labour leadership contender Ms Cooper called for the Prime Minister to intervene to stop the increase, pointing out that the Chancellor had just slashed benefits and capped the public sector at 1%.
“This is crazy. How on earth has David Cameron allowed this to happen? He needs to step in urgently and stop this MPs pay rise going ahead,” she said.
“The idea of increasing MPs pay by 10% at a time when nurses, care workers, police officers and our armed forces face another five years pay freeze is completely unfair.
“The Tories are cutting tax credits for ordinary families yet allowing this Ipsa increase to go ahead.
“I made it clear from the outset that this pay rise should not go ahead, and that MPs pay needs to reflect the wider conditions in the public finances and the economy.
“If it does now go ahead, I won’t take it. If that is impossible then I will put the money towards something like funding an apprenticeship or similar cause in my constituency.
“But I hope the Prime Minister does the right thing and intervenes to stop Ipsa pressing ahead with this.”