Mark Carney, the Governor of the Bank of England, has backed Philip Hammond’s call for public sector pay restraint and said austerity is “understandable” given the experience of private sector workers.
The Governor highlighted the fact that real incomes over the past decade have fallen by levels not seen since the beginning of the 19th century, with much of the decline driven by a decline in the wages of private sector staff.
It comes after Mr Hammond clashed with Cabinet colleagues last month as he refused to lift the 1pc cap on wages for public sector workers and suggested they are “overpaid”.
More than 5 million public-sector workers are subject to the cap until the end of the decade, with ministers blaming the freeze for the Tories poor performance in the General Election.
Mr Carney, who earned £880,000 last year including pension benefits, backed Mr Hammond’s position as he was asked about a three-day strike by some of the Bank of England’s support staff.