Steve Barclay has privately conceded he will have to increase his pay offer to NHS staff, in a U-turn that may help to end the growing wave of strikes. However, the Treasury has made clear he will have to find any new cash from within the existing health budget, raising the prospect of cuts to key services. According to senior sources who have spoken to the Guardian, Barclay has acknowledged that more than 1 million frontline personnel deserve more money – after months of repeatedly insisting the existing £1,400 award for 2022-23 was all the government could afford. His hardline stance led to him being called a “bullyboy” by nurses’ leaders and health unions claiming that ministers’ “intransigence” would lead to a campaign of industrial action that could last for months and involve regular disruption of NHS care and treatment. His newfound determination to end the walkouts by increasing the £1,400 offer, which has been confirmed by well-placed Whitehall sources, comes in advance of nurses in England staging two more stoppages next week, which will again force hospitals to scale back their activities. A government source said that the Treasury is waiting for Barclay to set out which NHS services could be scaled back in order to release what health service insiders estimated would be the £2bn to £3bn needed to offer more than 1 million workers an improved deal for 2022-23. Once he has done that, Treasury officials will assess whether going beyond the £1,400 original sum will threaten the government’s ambition to get inflation under control during 2023. Jeremy Hunt, the chancellor, has ruled out providing any extra cash, including from the Treasury’s reserves, to fund a one-off settlement for 2022-23 for health workers. He has told Barclay he will have to raid the budget of either his own Department for Health and Social Care (DHSC) or more likely NHS England in order to fund any improved offer. “Ministers are intent on preventing further NHS strikes and understand that there will have to be the offer of extra support on the table for 2022-23,” the government source said. Several health unions confirmed Barclay is working to find the money to fund an improved deal for this financial year. Unions have made clear that NHS staff must get more than the £1,400 planned or their strikes will continue for the foreseeable future. “There does seem to be some seriousness on the part of the DHSC to find a solution now,” said one official. Union leaders spoke of a change in atmosphere between them and Barclay on Monday, when he gave the first signals that his longstanding position was no longer sustainable. Ministers are closely watching talks on the long-running rail dispute, which both sides have said are nearing resolution, with an offer of 9.5% over two years expected, made up of 5.5% the first year and 4% the year after. This could set a benchmark for pay in other public sectors, meaning that Barclay would then know how much cash he would have available for an enhanced offer. NHS staff paid between £35,000 and £45,000 are regarded as particularly vulnerable to cost of living pressures, with many of those taking home less also receiving some benefits. Unions are preparing to escalate their campaign of industrial action over this year’s pay award. The GMB union is expected to announce early next week a series of further walkouts by its members in ambulance services in England and Wales. And a British Medical Association (BMA) ballot of 45,000 junior doctors in England is likely to produce a strong vote in favour of strikes. However, Barclay is unlikely to be able to bring forward any new proposals on pay in time to head off the strike next Wednesday and Thursday by nurses in England. He got a reminder of how difficult it will be coming up with a new offer that unions will find acceptable on Thursday. Health unions in Wales reacted negatively to the Welsh Labour government’s bid to break the deadlock over NHS pay there by offering staff a one-off payment, which would not be added to the baseline of their salaries, on top of the £1,400. But unions insisted they would only accept a bigger percentage increase in their salaries than the one already offered, which amounts to between 4% and 5% for most staff. Strikes are likely to continue as planned in Wales. In Scotland, Unite and Unison have accepted a “best and final” offer from Nicola Sturgeon of a £2,205 rise, which equates to about 7.5%, but the GMB and Royal College of Nursing have rejected it, underlining the difficulty of reaching agreement with all NHS staff. On Thursday, Barclay met the BMA, Hospital Consultants and Specialists Association and British Dental Association, whose members’ pay is advised on by a separate NHS pay review body to the one that helps set pay for all other health workers. Afterwards, though, Prof Philip Banfield, the BMA’s chair of council, said Barclay’s lack of recognition of the need to pay doctors a substantial salary uplift – junior doctors are seeking 26.2% – meant that trainee doctors should vote to stage walkouts in protest. He accused Barclay of using “platitudes” when he stressed his commitment to the NHS. Banfield urged the health secretary to use the time before the ballot ends on 20 February to make a concrete offer on junior doctors’ pay. “In the meantime, the best thing junior doctors can do now is … vote ‘yes’ to taking action, ‘yes’ to standing up for our health service and ‘yes’ to protecting patient care,” he said. Pressure on ministers to find a solution to at least some of the NHS strikes is all the more intense given the prospect of disruption in yet more areas of the public sector, notably civil servants. The PCS and Prospect unions were scathing about their meeting with Cabinet Office minister Jeremy Quin on Thursday morning, with the head of the PCS describing it as a “total farce”. While the Cabinet Office said Quin wanted to “listen to and understand” union concerns, Mark Serwotka, the PCS general secretary, said: “This meeting was a total farce. Despite being well-trailed by the government as a chance to resolve the crisis, it was nothing of the sort because the minister had nothing to offer.” The head of Prospect, Mike Clancy, said his union would continue with plans to ballot members on strike action given the lack of movement from Quin.