Millions of public sector workers face a squeeze on wages after Liz Truss dumped plans to overhaul government spending.
The Prime Minister promised she would look again at how much money goes to hospitals, schools and other public services in the wake of rocketing inflation.
But she has now quietly shelved a fresh Spending Review and will stick to old figures drawn up by Rishi Sunak last year - meaning public sector workers will have real-term pay cuts before 2024.
Torsten Bell, of the Resolution Foundation, told The Times: "The reality of double-digit inflation will tightly squeeze the budgets of schools and hospitals, as well as households.
"Higher-than-expected energy bills and pay rises being absorbed within existing budgets will mean tough choices for those delivering those services.
"In the longer term, there are clear trade-offs between the £45billion tax cuts announced last week and the quantity and quality of public services."
Institute for Fiscal Studies head Paul Johnson said: "It is pretty extraordinary.
"There's a real problem for schools and hospitals doing even the pay rises that they're doing.
"It's going to be a real squeeze."
Mr Sunak set out government spending plans for the next three years last October before Russia invaded Ukraine and when inflation was expected to peak at 4%.
It has already risen to 9.9% and is forecast to a whopping 11% in the autumn, remaining at a high level into next year.
In the Tory leadership contest this summer Ms Truss promised to revisit the spending plans when she became Prime Minister.
Former Tory chancellor George Osborne said the government’s economic approach was schizophrenic.
He told Channel 4 : "You can't just borrow your way to a low-tax economy.
"Fundamentally, the schizophrenia has to be resolved: you can't have small-state taxes and big-state spending."
A spokeswoman for the Treasury said: “While driving economic growth and tackling high inflation, we will continue to take a responsible and disciplined approach to spending.
"It’s more important than ever that departments work efficiently to manage within existing budgets, focusing on unlocking growth and delivering high-quality public services.
