A Treasury spokesperson has denied claims Chancellor Philip Hammond said public sector workers are "overpaid".
The comments, reported by The Sunday Times, were supposedly made by the Chancellor in a Cabinet meeting.
It is the second row in less than a week Mr Hammond has become embroiled in, after he reportedly quipped that driving trains has become so easy that "even a woman" can do it.
The Chancellor has previously said the government must "hold its nerve" over public sector pay, despite other cabinet colleagues indicating their support for lifting the one per cent cap on it.
Following terror attacks in London and Manchester, and the Grenfell Tower fire, there was widespread public support for ending the limit on public sector workers, particularly in the emergency services.
But the government voted to retain it.
Following the fury over Mr Hammond's comments – which have received significant coverage in recent days – political observers have suggested the uproar was caused by leaks from pro-Brexit politicians who are moving against him.
The Chancellor, who campaigned for the UK to remain in the European Union, has previously argued for softer approaches to Brexit, such as advocating staying within the customs union.
He later confirmed the UK will leave both the customs union and single market but warned earlier this month that free trade deals would have limited benefits for the UK.
“Philip Hammond can't remember saying public sector workers were 'overpaid'. Unfortunately a large number of his colleagues can,” wrote Sunday Times political editor Tim Shipman on Twitter.
