Philip Hammond said public sector workers receive a 10% “premium” over the private sector, as he defended the government’s pay policy.
The chancellor told Andrew Marr, the figure was a “simple fact” once pension entitlement is taken into account.
He would not comment on reports that he said public servants were “overpaid”, adding that ministers should not be discussing private cabinet meetings.
John McDonnell said Labour would end the 1% cap on pubic sector pay rises.
The shadow chancellor said his party had set aside £4bn on an annual basis, to bring pay in line with inflation.
Pay rises for most public sector workers are set by independent pay review bodies, but have effectively been capped at 1% each year since 2013.
Before that, there was a two-year freeze on pay for all but the lowest-paid workers.
The government has come under pressure over the policy since the general election, with some Conservative ministers speaking out in favour of lifting the cap.