Police Minister Nick Hurd has told the House of Commons that ending the public sector pay freeze is "under active discussion."
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 they have made over the years to reducing the deficit we inherited from the party opposite - and in that, the work they have done in safeguarding hundreds of thousands of jobs.
"How we do that in a way, that is sustainable and affordable, is under active discussion."
Number 10 has insisted the 1 per cent pay cap is still in place and that there have been no changes to the policy. Last week a Number 10 spokesperson indicated the policy was under review, before later claiming it wasn't.
Hours earler, a Number 10 spokesman had suggested the public sector pay cap would be in place until at least April 2018.
It was pointed out that pay rates for the professions for the current financial year have already been set at a below inflation capped level.
Only the Chancellor Philip Hammond could intervene to boost take home pay for doctors nurses and armed forces personnel before then, with the autumn statement later this year a potential moment for an announcement.
But Mr Hammond is wary of large extra spending commitments, with the government still promising to abolish the deficit by the mid-2020s.
The cabinet are understood to be in open dissent over the issue, with the pay review bodies covering police and teachers' pay due to report within the next few weeks. On Sunday Boris Johnson indicated the cap would be lifted without the Government even having to ditch other commitments in order to balance the books.
“The Foreign Secretary supports the idea of public sector workers getting a better pay deal and believes the findings of the pay review bodies should be respected,” a source close to the Foreign Secretary told The Guardian.
Figures published this morning showed that the number of nurses leaving the profession was up 51 per cent as compared to four years ago. The profession has been restricted to a maximum annual pay rise of one per cent since 2010, with Health Secretary Jeremy Hunt vetoing even a one per cent rise on several occasions. The Royal College of Midwives recently went on strike for the first time in its history over the issue of pay. 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). It is likely to cost billions of pounds.
In a Sunday broadcast interview, Mr Gove said it is the Government's "collective view" to "respect the integrity" of pay review bodies and suggested he was "suppressing" his own opinion on austerity.
In March, the NHS pay review body highlighted "widespread concerns" about recruitment, retention and motivation among employers and staff and said "we are approaching the point when the current pay policy will require some modification, and greater flexibility, within the NHS".
Health Secretary Jeremy Hunt will reportedly cite the report while demanding the pay cap is scrapped for NHS workers.
Conservative MP Maria Caulfield, a former nurse, said she had found the pay cap "extremely difficult" and most nurses worked extra shifts to make ends meet.
She told BBC Radio 4's Today programme: "It's a difficult, stressful, responsible job and if people aren't paid enough so they can make ends meet they will go and do something else.
"I think there is resentment building and not just in nursing, but across the public sector, that frontline staff have carried these services for the last seven years and if there is no recognition of that and no pay coming forward to recognise that then that's when the resentment builds," she added.
Tory former work and pensions secretary Stephen Crabb said Ms Caulfield had made a "compelling" case for a pay hike.
But Conservative former chancellor Lord Lamont said it was wrong for Cabinet ministers to "gang up" on Mr Hammond.
He told Today: "I think it is making his position, which is always very difficult, very very awkward indeed."
The Tory peer said austerity was "just another word for living within ones means".
"It's not really austerity," he added.
"People are talking about austerity as though it were an issue of too many repeats on television or they had got tired of watching Poldark and wanted a better programme
"This is not a choice. It is unavoidable that we have restraint on public spending."
Liberal Democrat Treasury spokesman and leadership candidate Sir Vince Cable said: "The staff who keep our vital public services running deserve a long-overdue pay rise.
"The situation has changed since the public-sector pay cap was first introduced, at a time when there was a real budget emergency and fear of large-scale public-sector unemployment.
"The issue we face now is very different. We are struggling to recruit and retain public-sector staff.
"We have an unsustainable situation where teachers and nurses are having to leave their jobs because they can't afford to live in the area they work.
"If the Government can find billions for corporation tax cuts, it is time they found a little bit extra for those working so hard to deliver our public services.
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