Chancellor Rishi Sunak could save up to £23 billion as he rebuilds public finances if he were to impose a three year public sector pay freeze, a centre right think tank has said.

The Centre for Policy Studies (CPS) warned that without action to curb pay, the Government will face a sharply rising public sector wage at a time of increased borrowing due to the pandemic.

Any move to freeze public pay would prove highly controversial – not least due to the overwhelming public support for the NHS during the crisis.

The CPS however argued private sector workers had suffered far more in the pandemic and that measures were needed to ensure the labour market was not unfairly weighted towards the public sector.

In a report published ahead of Mr Sunak’s spending review next week, it said that if the NHS was excluded from the pay freeze, it could still save £15.3 billion over the three years.

Alternatively, it said that an annual 1% pay cap would save £11.7 billion over the period – or £7.7 billion if it did not apply to healthcare workers.

CPS director Robert Colvile said: “The economic impact of the Covid-19 pandemic has been severe but the pain has not been shared equally.

“Healthcare workers aside, it is difficult to justify generous pay rises in the public sector when private sector wages are actually falling.

“At the same time, there is a need to control public spending and reduce the structural deficit which the pandemic is likely to have opened up.”

The report was strongly condemned by the Unite trade union which said public sector workers had already borne the brunt of the Tories’ austerity cuts following the financial crash.

UCU assistant general secretary Gail Cartmail said they suspected the CPS was being used as an “outrider” ahead of Mr Sunak’s statement next week.

“The CPS analysis is insulting to those public sector workers that have underpinned the fabric of society during this continuing pandemic,” she said.

“In the spring, the Prime Minister was praising NHS staff for saving his life.

“Now, in the autumn, he needs to ensure that his Chancellor turns those warm words into hard cash for those that ensure the efficient running of the NHS, schools and colleges, and the myriad of services provided on a daily basis by local councils.”