"Docking the pay of the North East's 274,000 public sector workers would have a serious impact on the individual nurses, teachers and other workers' families at a time of sustained pay freezes and rising cost of living.

"Such is the scale of the impact it would also harm our region's private sector since people here would have even less money to spend on the high street and so struggling retailers would suffer too."

He added: "This policy will be political poison for Conservative and Liberal Democrat MPs representing seats with relatively low pay in the North. They should be near the front of the queue urging George Osborne to think again."

Earlier this year, Vince Cable warned of "practical problems" over implementing such a change.

The Business Secretary said: "The Government's overall approach is to try to encourage flexibility. But I do recognise the practical problems in the public sector.

"It isn't just a political issue, the fear that people are going to be levelled down in some of the relatively low wage areas."

Asked about whether such a move would suck money out of the regional economy and depress private pay, Mr Cable said: "We're obviously got to think about it very carefully about for precisely that reason."

He added: "There are two sides to all of this. I realise it's a subject that will have to be approached with very great care."