Rishi Sunak will give millions of public sector workers pay rises of up to 6.5 percent.
The Prime Minister accepted the recommendations from pay review bodies, thought to include 6.5 percent rises for teachers and 6 percent for junior doctors.
But Mr Sunak confirmed the public sector pay rises will not be funded by more Government borrowing or higher taxes, meaning spending cuts may be required.
He told a press conference in Downing Street: “Those (pay review) bodies have considered a range of evidence about where to set this year’s pay. And their recommendations to Government are for public sector pay rises to go up by a significant amount.
“Now clearly, this will cost all of you as taxpayers more than we had budgeted for.
“That’s why the decision has been difficult, and why it has taken time to decide the right course of action.
“I can confirm today that we are accepting the headline recommendations of the pay review bodies in full, but we will not fund them by borrowing more or increasing your taxes.”
Mr Sunak issued a warning to trade unions and workers still involved in strikes and industrial action that the new pay offer is “final”.
He said: “Now there’s a clear message here. There are always choices. Budgets are not infinite. When some ask for higher pay, that will always create pressures elsewhere.
“It is now clear momentum across our public services is shifting. The vast majority who just want to get on with their life’s calling of serving others are now returning to work.
“Today’s offer is final. There will be no more talks on pay. We will not negotiate again on this year’s settlements and no amount of strikes will change our decision.”
He said the accepted recommendations were a “fair deal for the British taxpayer”.
