Reports that Theresa May and Philip Hammond were preparing to lift the public sector pay cap were not denied by the prime minister’s spokeswoman, who said that many were just about managing

Downing Street has hinted that public sector pay may rise above inflation for the first time in seven years after declaring that Theresa May “recognises the sacrifice” of workers.

No 10 did not deny reports that the prime minister and her chancellor, Philip Hammond, were preparing to end the long-standing one per cent cap on pay rises in the public sector.

Ministers are due to send letters setting out a new remit for the public sector review bodies within weeks, which could effectively spell the end of pay restraint introduced in 2010.

Cabinet ministers including Justine Greening, the education secretary, and Jeremy Hunt, the health secretary, have been pressing to raise salary levels. Mr Hammond has been reluctant to increase borrowing to fund a rise.