Scottish Finance Secretary John Swinney told the BBC over the weekend that the Scottish Government would refuse to apply localised pay to all public sector wages for which it had responsibility.

‘My counterparts in Wales and Northern Ireland are as vociferously opposed to this as I am,’ he added.

Sammy Wilson, Swinney’s counterpart in Northern Ireland, also spoke out: ‘This proposal addresses a problem that doesn't even exist,’ he said.

‘There is no evidence that nationally agreed public sector wages create problems for the private sector in recruiting workers.’

Welsh First Minister Carwyn Jones said people should not be penalised because of where they live.

‘We should be looking at a situation where we look to close the gap in income between different parts of the UK rather than make it worse, which is exactly what this will do,’ he said.

Osborne has floated the idea, ahead of Wednesday’s Budget, of replacing national pay deals in the public sector with local agreements that reflect local pay rates for private sector workers and local differences in the cost of living.

But the plan has been criticised in the devolved jurisdictions – and in northern England – as a ploy to subsidise higher incomes in the Southeast. Trade unions say it would create huge disparities and drive down both incomes and economic activity in already deprived parts of the UK.

Swinney said he had told the Treasury that he regarded the idea as ‘potentially disastrous’.

He said: ‘It will undermine economic confidence in areas far removed from the Southeast of England and it will do absolutely nothing to solve the regional inequities that exist within the UK.’

What is less clear is the extent to which the devolved administrations could defy the policy without suffering consequent cuts in their block grant funding from Westminster – though London might hesitate about creating such a stand-off in Scotland in the run-up to the independence referendum.

Swinney said the Scottish Government would ‘go absolutely nowhere near this proposal for the areas of pay policy that are under our control’. That would include health and council services and most quangos, but exclude many civil servants.

But he also made clear that the Scottish Government would not divert funds to make up the difference for those areas where it did not control pay.

Labour urged the Liberal Democrat Scottish secretary, Michael Moore, to intervene with the chancellor against the plan.