Hammond eases public sector pay cap, but the squeeze goes on

The chancellor insisted police and prison officers' rises will come from existing budgets - and they are well below inflation

Philip Hammond's re-emergence as a power in the cabinet can be seen clearly as the battle rages inside government over the thorny question of public sector pay.

There may have been a green light from No 10 to rip up the current cap and give the police and prison officers a 1% rise plus a 1% bonus for 2017-18, but the Treasury has made sure the bonus is not part of workers' consolidated, pensionable pay and is funded from within existing budgets.

Related: Public sector pay cap to be lifted next year, No 10 says