Prime Minister Gordon Brown faced a summer of industrial unrest on Friday when union leaders warned that a million public sector workers were poised to strike over pay.
The union warnings came only days after Brown ended a revolt in the Labour Party by offering emergency tax cuts.
Brown's popularity has crumbled in the polls less than a year after he took over from Tony Blair, raising doubts over whether he can stay on as prime minister.
Labour was pushed into third place in local elections this month and risks losing a safe parliamentary seat next Thursday in a contest triggered by the death of the sitting member.
After weeks of party dissent over the abolition of a 10 percent tax band that had benefited low-earners, Brown's government announced it would borrow an extra 2.7 billion pounds at a time when the public finances are tight in order to fund tax cuts for 22 million people.
Unions immediately sensed weakness and are rallying members to consider industrial action over low pay rises at a time when inflation is soaring.
"Members are angry," said Alex Flynn of the Public and Commercial Services Union, which represents nearly 300,000 public sector workers from coastguards to job centre staff.
"They are being told they are the causes of inflation when in fact they are the victims - it's insulting."
Unison, the country's biggest public sector union with nearly 900,000 members, plans to ballot on several days of strike action after it rejected a 2.45 percent pay increase.
"Members have already voted to reject the offer. If they vote to strike they will have to commit to sustained industrial action - it will be longer than the traditional one-day action," a spokeswoman said.
The result of the vote will likely be announced in June.
But the government looks unlikely to budge for now.
Brown's spokesman said the prime minister had a lot of respect for the work done by public sector workers but restraint was important to help keep inflation down.
"It is important that we maintain our discipline when it comes to public sector pay," the spokesman said.
Inflation now at 3 percent is expected to rise further in the coming months.
