Rachel Reeves hints at above-inflation public sector pay rise

But Ms Reeves told Sunday with Laura Kuenssberg that “we will do it in a proper way and make sure the sums add up” – emphasising that her spending rules are “non-negotiable”.

The new chancellor promised a decision on public pay this month, saying “people won’t have long to wait”.

Speaking in an interview to be broadcast on Sunday morning, Ms Reeves also accused the Conservative Party of calling the election because “they weren’t willing to make tough decisions, and they just ran away”.

She said the decision about teachers’ pay had sat on the former education secretary’s desk, and that the Conservatives had allowed an unacceptable situation to build up in prisons.

The estimated cost of pay rises of 5.5% for teachers and certain NHS staff could reach £3bn, according to the Institute for Fiscal Studies (IFS). That would be significantly more than the 2.5-3% the Treasury had expected.

IFS director Paul Johnson said paying for such an increase would require the government to either increase borrowing or taxes, or cut spending elsewhere.

The most recent figures from the Office for National Statistics (ONS) put inflation at 2% in May and June – suggesting a pay offer above 2% would count as being above inflation.

But Mr Johnson told BBC Radio 4’s Today programme on Saturday that the 5.5% figure was “roughly what pay is rising by across the economy”.

Traditionally, governments follow the recommendations of the independent bodies – but ministers are not obliged to stick to their suggestions.

Recommendations for other sectors are yet to be received, but the chancellor does plan to announce the settlements before the end of July.