Theresa May’s plan to give 2 million public sector workers a £2bn pay rise from existing departmental budgets has been branded as “insulting” by Labour.

The above-inflation increase, to be unveiled on Monday, will be one of the prime minister’s final acts in office before handing over the Conservative leadership the following day.

According to a leak of the plans, police officers are set to receive a 2.5 per cent increase in their pay packets while soldiers will see a 2.9 per cent increase, and teachers and other school staff will get a 2.75 per cent boost.

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Dentists and consultants, The Times said, will receive a 2.5 per cent increase while senior civil servants will also have their wages increased by 2 per cent.

But the Treasury is expected to say that, barring some extra funding for schools, the money will have to come from existing departmental budgets.

Public sector pay rises were capped at 1 per cent after the Conservative-led coalition came to power at the beginning of the decade, but was scrapped last year as Ms May vowed to end the era of austerity.

The rises to be announced on Monday do not apply to other public sector staff, such as nurses, whose pay is dealt with separately.

Jonathan Cribb, a senior research economist at the Institute for Fiscal Studies, said: “These public sector pay rises are higher than last year’s and considerably higher than the 1 per cent for many years before that. 

“It is the highest nominal pay increase since the coalition. But these increases are still slower than pay rises that are happening on average in the private sector.”

“With the partial exception of schools, there seems to be no new money to fund these pay rises, meaning savings will have to be made elsewhere.”

But Labour branded the rise “insulting”, and shadow chancellor John McDonnell added: “After years of holding back the pay of our dedicated public sector workers, it is shameful for the government to pay for ending the public sector pay cap with more cuts.”

“With overall wage growth at 3.4 per cent, it looks like Philip Hammond’s final act as chancellor will be this insulting pay offer set to push public sector workers further behind.”

During the leadership contest, frontrunner Boris Johnson refused to commit to a pay rise for public sector workers, but one of his key backers, health secretary Matt Hancock, said the public sector would be “shown some love” if the ex-foreign secretary won the Tory leadership race.

“Of course he’s right, we are going to make sure that we properly fund our public services,” Mr Johnson said.

“It’s very important when you’re in charge of a great public service, whether it’s the police or transport, you’ve got to make sure – or local government – you’ve got to make sure that you understand their cares and their needs.”

The leak of Ms May’s plans for a public sector pay rise came as Britain’s budget deficit widened to £7.15bn, according to the Office for National Statistics.

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