Chancellor Philip Hammond could revive controversial plans for regional pay which would see West Midlands workers paid less than people doing the same job in other parts of the country.

Mr Hammond is to introduce a regional element to public sector pay when he lifts the current one per cent cap on salary increases for workers such as nurses, police officers and teachers, according to reports.

He is said to have asked officials to look at the case for linking pay awards to the cost of living, which would mean salaries are lower in areas with lower costs.

The Government has neither confirmed nor denied the reports.

It comes five years after former Chancellor George Osborne set out proposals for a system of local and regional pay - only to abandon the scheme following opposition from trade unions and the Liberal Democrats, who were members of a coalition government with the Conservatives at the time.

Documents published by the Treasury in 2012 said that public sector workers in many parts of the country were paid significantly more than private sector workers with the same education, age and qualifications. However, in other areas the pay rates were about the same.

Public sector workers in the West Midlands metropolitan county, including Birmingham, Dudley, Walsall, Sandwell, Coventry, Wolverhampton and Solihull, received a six per cent “pay premium”, the Treasury said, while in other parts of the West Midlands region the pay gap was 14 per cent.

By contrast, the Treasury found public sector workers in the South East were underpaid.

Mr Osborne wanted to make public sector pay “more responsive to local labour markets”, which would have meant paying different salaries in different parts of the country.

It’s not known whether Mr Hammond is proposing to adopt the same model as Mr Osborne, but London’s Evening Standard newspaper reports that Ministers are considering putting London nurses first in the queue for higher pay as part of a “regional pay boost”.

This would come on top of the existing London allowance already paid to NHS workers.

The Government is under pressure to axe the current one per cent pay cap, which means pay rises each year by less than the rate of inflation for public sector workers - effectively a real cut in their pay.

Birmingham MP Steve McCabe (Lab Selly Oak) said increasing pay but introducing a regional system would be “one step forward two steps back”.

He said: “Is it easier to fight crime in Birmingham or put out a fire? If not then why should police officers or firefighters be paid less?”

Transport Secretary Chris Grayling declined to deny speculation about the pay cap when he spoke on BBC Radio 4’s Today programme.

He said:”We have listened to the lessons from the general election campaign, we look carefully at the issues we face as a country, but when it comes to these big financial decisions they are things that have to wait for the budget.

“All of us want to see a situation where we can provide people with additional pay, additional job opportunities, but in order to do that we have to have a strong, growing economy.”