Philip Hammond hints at end to austerity as he admits public are 'weary' of cuts

The public are "weary" of austerity but the Government's approach to the public sector pay cap has not changed, Chancellor Philip Hammond said.

At the end of a long day of conflicting messages over a possible end to the public sector pay freeze, the Chancellor told the Confederation of British Industry President's dinner that the Government remained committed to maintaining the balance between being fair to public servants and the taxpayers who fund their wages.

He said there had to be a "grown-up" debate about how to meet demands for improved public services, arguing that increasing economic growth or broad-based tax increases were the only ways to fund them.

Earlier in the day, police minister Nick Hurd told the Commons there was an "active discussion" under way to ensure frontline workers are paid fairly, while Boris Johnson has also backed a wage boost for public sector staff.

Foreign Secretary Boris Johnson has also indicated that an end to the 1 per cent pay cap was possible, placing further pressure on the Chancellor, who is committed to bringing UK spending in to line. On Monday night the Chancellor repeated his position, that further spending could only be paid for by tax rises.

Several Tory MPs have added to the pressure on Theresa May and Mr Hammond by calling for an end to the pay cap after the party lost its majority in the General Election to anti-austerity Labour, which has pledged to scrap the 1 per cent ceiling.

But in a speech at a Confederation of British Industry dinner, Mr Hammond stressed the need to maintain discipline over the public finances.

He said: "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.

"But we do, of course, recognise that the British people are weary after seven years' hard slog repairing the damage of the Great Recession.

"They have travelled a long way but still the sunlit uplands seem stubbornly to remain one further ridge away."

Mr Hammond said that without strong economic growth, there is no way to support the improvements to public services that people want to see.

The Chancellor 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?'."

During Home Office questions in the Commons, Mr Hurd said: "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.

"And in that, the work they have done to safeguard hundreds of thousands of jobs. How we do that in a way that is sustainable and affordable is under active discussion."

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."

Increasing public sector pay would boost the earnings of 5.1 million workers, including 1.6 million in the NHS and 1.5 million in public education, according to the Institute for Fiscal Studies (IFS).