Recommendations on nurses' and doctors' pay are being finalised this month amid speculation that the review bodies will award at least 5 per cent on basic rates, despite pressure from the government to limit rises to 'affordable' levels.
The pay review bodies are expected to report to ministers later this month and the government's decision is due in February.
Former health minister Alan Milburn wrote to the chairs of the doctors' and nurses' pay review bodies last month.
He warned that the proposed new pay system for the NHS could be jeopardised by an award that was too generous. He said reform depended on having 'sufficient financial headroom left after the 1999 pay round'.
New health minister John Denham, who takes over responsibility for pay, is expected to continue the line taken by Mr Milburn, whose letter was the second attempt by the government to influence the pay review bodies' recommendations outside the normal process of submitting evidence as an interested party.
NHS Confederation human resources chair Andrew Foster said that there were 'extremely good reasons' for pay reform and added that 'the last thing we want is for that to be blown out of the water by a pay award we can't afford.'
Health unions are pressing for a higher award because of nurse shorgages.