Rishi Sunak is to take on public sector union barons over pay to curb stubborn inflation.
Ministers could overrule wage increases recommended by review bodies despite the threat of further crippling strikes.
The Prime Minister has admitted he is willing to make “difficult decisions”, with rises of six percent facing a possible veto.
He hinted a clampdown is necessary to curb the rate of price rises, which stood at 8.7 percent in the year up to May.
It comes as economists have warned that high wage settlements are helping to stoke inflation, while the cost of the public sector wage bill hits other spending and increases government debt.
Mr Sunak, who today was campaigning with Tory candidate Steve Tuckwell ahead of the Uxbridge and South Ruislip by-election, said: “When it comes to public sector pay I’m going to do what I think is affordable, what I think is responsible.
“Now that may not always be popular in the short term but it’s the right thing for the country. I have to make difficult decisions as Prime Minister. Everyone can see the context that we’re in with inflation and interest rates.”
He urged cash-strapped Britons to hold their nerve over rate hikes, saying “there is no alternative”.
Mr Sunak defended the Bank of England raising interest rates to five percent, a 15-year high, last week.
The Chief Secretary to the Treasury also stressed that ministers would consider “the implications for inflation” when deciding on public sector workers’ pay.
John Glen said: “As a matter of principle pay review bodies are a very significant part of resolving the pay issues.
“But obviously we’ve also got to take account of the effect on inflation. That would be irresponsible not to do that.
“Obviously I’m very aware of the massive contribution that teachers, nurses and public sector workers make and we’ve got to get the right outcomes that are fair to them but also aren’t inflationary.
“Inflation is going to be tough to get down.”
Pay review body recommendations are not legally binding though they are typically accepted.
Mr Sunak insisted: “We’ve got to hold our nerve, stick to the plan and we will get through this.”
He insisted big pay rises would be “giving with one hand and taking with the other through higher inflation and interest rates”.
John O’Connell, chief executive of the TaxPayers’ Alliance, said: “The Prime Minister is right to restrain public sector pay.
“With debt at record levels and inflation persistently high, ministers have to take action to get spending under control.
“But Sunak could give everyone, public and private sector alike, relief with targeted tax cuts.”
The independent pay review bodies are said to have recommended a 6.5 percent rise for teachers in 2023-24 and at least six percent for police officers, prison officers and junior doctors. The total cost is estimated to be more than £5billion. Their advice is expected to be published next month alongside the formal pay offers.
A government source said: “We have now received the recommendations from most of the pay review bodies. The Government is considering these and will respond in due course.”
Former Conservative chairman Sir Jake Berry accused BoE governor Andrew Bailey of having been “asleep at the wheel” for failing to get a grip of the inflation crisis early on, suggesting he be replaced.
Mr Sunak offered support to the governor but stopped short of saying he was doing a “good job”.
The PM said: “The Bank of England is doing the right thing. It has my total support.”
Mr Sunak has promised to halve inflation by the end of the year, a target Mr Glen said was difficult.
Meanwhile, former Chancellor Kwasi Kwarteng dismissed those calling for a recession to end the inflation crisis as “mad”.
Rachel Reeves, Labour’s Shadow Chancellor, said on Saturday that Labour would negotiate a “fair and affordable” deal with workers but she failed to rule out blocking public sector pay rises.
