Mr Hammond is believed to have vehemently opposed lifting the one per cent cap on wages for public-sector workers in the meeting of Theresa May’s most senior parliamentarians on Tuesday.
According to reports, Mr Hammond said “public-sector workers are overpaid when you take into account pensions” before going on to describe train drivers as “ludicrously overpaid”.
The Chancellor defended his point of view, claiming public sector workers earn more than those in the private sector along with taxpayer-funded pensions.
More than five million public-sector workers have seen their incomes fall in real terms over the last seven years.
Last night the Treasury confirmed the Chancellor told his colleagues public sector workers enjoyed a “10% premium” in income over private sector workers because of their pensions.
The Treasury has since denied the allegation Mr Hammond said workers were “overpaid”.