Philip Hammond has admitted the British people are “weary” after seven years of austerity.
But the Chancellor told the Confederation of British Industry (CBI) the Government has not changed its position on the issue of the public sector pay cap.
It comes after Downing Street denied the cap – which limits public sector pay rises to 1% – was about to be scrapped.
Several Cabinet ministers have suggested it should be relaxed.
Mr Hammond told the CBI: “Our policy on public sector pay has always been designed to strike the right balance between being fair to our public servants, and fair to those who pay for them.
“That approach has not changed, and we continually assess that balance.
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“But we do, of course, recognise that the British people are weary after seven years’ hard slog repairing the damage of the Great Recession.”
Many of the calls for a relaxation of the pay cap have been in support of emergency personnel and other front-line workers, like nurses.
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Policing minister Nick Hurd told MPs on Monday: “We want to make sure that frontline public service workers, including the police, are paid fairly for their work, not least because of the contribution that they have made over the years to reducing the deficit that we inherited from the party opposite.
“How we do that in a way that is sustainable and affordable is under active discussion.”
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Responding to Mr Hurd’s comments, the Prime Minister’s official spokesman said: “There are public sector pay review bodies carrying out their work. We are in the process of working through recommendations. That is what the minister was referring to.”
Pressure has been growing on Mrs May and Mr Hammond to ease the 1% limit.
Boris Johnson became the latest to add his support for a rethink after Michael Gove, Justine Greening and Jeremy Hunt were reported to be pushing for new deals for some staff.
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Mr Hammond said there needed to be a “grown-up” debate about public services, arguing that the only way to ensure they improve was by promoting economic growth.
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He said: “That does not mean we can’t have a debate in Britain about the level of funding of public services.
“But it does mean that it has to be a grown-up debate where we acknowledge that borrowing to fund consumption is merely passing the bill to the next generation and reject the fallacy that the burden of additional taxation will always fall on someone else.
“Then, hopefully, we can build a consensus that the only sustainable solution is to increase the trend rate of growth.
“So the serious question to the electorate cannot be, ‘Would you like us to tax someone who isn’t you to pay for you to consume more?’, but, ‘Would you be willing to pay more tax to consume more public services?.'”
Some public sector worker pay review bodies are expected to report to the Government later this month and it is claimed they are likely to recommend figures higher than the cap.
The Conservatives committed themselves to keeping it in place until 2020 in their election manifesto.