Millions of public sector workers in England could face a pay freeze next year, the BBC has learned.
The 5.5 million affected include key workers lauded for their service during the pandemic, from the armed forces and police, to teachers and civil servants.
It is thought NHS staff would be exempt from the measures, but unions called a freeze for any sector “insulting”.
The Treasury is trying to bolster public finances after a huge rise in spending to fight coronavirus.
Government borrowing hit its highest October level ever last month as the UK continued heavy spending to support the economy during the coronavirus pandemic.
Chancellor Rishi Sunak will set out his Spending Review next week, giving details of how much money will be allocated to different departments during the 2021-22 financial year.
He is expected to make the case for pay restraint to reflect a fall in private sector earnings this year.
The Treasury declined to comment but pointed to language used by Mr Sunak in a letter about the Spending Review in July.
The letter outlined that in the “interest of fairness we must exercise restraint in future public sector pay awards, ensuring that across this year and the spending review period, public sector pay levels retain parity with the private sector”.
The Treasury has also taken interest in a report by think tank Centre for Policy Studies that suggested a three-year freeze could save £23bn by 2023, or £15bn if NHS workers were exempt.
Health Secretary Matt Hancock refused to comment on whether he had fought for NHS workers to be exempt from any possible public sector pay freeze.
Mr Hancock told the BBC, he wasn’t going to comment on internal discussions, adding that he “will always fight for the NHS… there’s an incredibly tough economic situation as well”.
In September the Office for National Statistics calculated that public sector workers on average earned 7% more than private sector workers last year.
‘Cruel body blow’
Any gap would have further widened in a year that has seen falls in private earnings during pandemic shutdowns, while public sector wages have been maintained.
The chancellor’s wish to maintain “parity” indicates that a freeze or cap on pay levels in the coming years will be justified as a response to the divergence.
The Unite trade union said a pay freeze would be “insulting to those public sector workers that have underpinned the fabric of society during this continuing pandemic.”
“In the spring, the Prime Minister was praising NHS staff for saving his life. Now, in the autumn, he needs to ensure that his chancellor turns those warm words into hard cash for those that ensure the efficient running of the NHS, schools and colleges, and the myriad of services provided on a daily basis by local councils.”
Unison general secretary Dave Prentis said a new pay cap would be a “cruel body blow” to NHS staff not on the frontline. “Key workers across all public services remain at the heart of the fight against Covid,” he said.
And Matt Wrack, the Fire Brigades Union general secretary, said: “We warned ministers in the summer that clapping key workers would not pay the bills – but it seems in government memories are short, and morals in short supply.
“It won’t be lost on workers that their wages are set to be cut whilst the government continues to hand out contracts worth billions of pounds to its cronies.”
In July, almost 900,000 public sector workers were given an above-inflation pay rise – including doctors and teachers – because of their “vital contribution” during the pandemic.
But there were complaints that many workers missed out, and unions plan to campaign against the new pay freeze.
The savings on pay come as government borrowing stands near a peacetime record and the national debt is worth more than the size of the economy.
UK government borrowing hit £36.1bn in September – £28.4bn more than last year and the third highest in any month since records began in 1993. Meanwhile public debt rose further above the £2tn mark, to £2.06tn.
Fiscal watchdog the Office for Budget Responsibility will also publish its first full assessment since March of the economic and fiscal impact of the pandemic.
Do you work in the public sector? Share your views and experiences by emailing firstname.lastname@example.org.
Please include a contact number if you are willing to speak to a BBC journalist. You can also get in touch in the following ways: