The Government has been warned that NHS staff will quit over the 1 per cent pay rise which union bosses have said will 'horrify' the public.
Unions and Labour said evidence to the NHS Pay Review Body from the Health Department was a 'callous and an enormous slap in the face' for workers and warned the pay rise will damage morale.
Meanwhile, the Government defended the figure by pointing to the freeze on pay in other public sectors and said it continues to support the NHS and its staff.
Jon Skewes of the Royal College of Midwives said a 1 per cent pay rise would be an 'absolute insult' to hardworking midwives, maternity support workers and other NHS staff.
He added: 'Our members are working harder than they have ever done to deliver safe care to women and their families in the face of longstanding staffing shortages that existed prior to the pandemic.
'Do the Government have any idea what a pay proposal like this will do to morale? Midwives have already been eyeing the door and this will undoubtedly push many of them towards it.
'Our members and all NHS staff deserve a fair and decent pay rise and a meagre 1% will not cut it.'
On Wednesday, Chancellor Rishi Sunak revealed tens of billions of pounds worth of spending in the latest budget and compared the country's borrowing to wartime level.
Health and social care were both notably absent from any increased funding and in its submission to the NHS Pay Review Body today, the DHSC said that any higher than one per cent 'would require re-prioritisation'.
It added: 'COVID-19 has created unavoidable direct and indirect financial impacts in the 2020-21 financial year and contributed to a challenging wider economic context.'
Unison head of health Sara Gorton said: 'A 1 per cent pay rise is the worst kind of insult the Government could give health workers who've given their absolute everything over the past year.
'The public will be horrified. Staff will think it's some kind of joke.'
Labour leader Sir Keir Starmer attacked the pay rise, sharing the news on Twitter and writing: 'You can't rebuild a country by cutting nurses' pay.
'Give our Covid heroes a pay rise.'
Meanwhile, shadow health secretary Jonathan Ashworth said: 'A pay cut for NHS staff is the ultimate kick in the teeth to our NHS heroes who have done so much to keep us safe over the past year.
'Rishi Sunak promised to be open and honest with the public yet shamefully insults every single member of NHS staff, sneaking out this announcement and failing to include any mention of NHS pay in the Budget.'
Royal College of Nursing general secretary Dame Donna Kinnair said: 'This is pitiful and bitterly disappointing.
'The Government is dangerously out of touch with nursing staff, NHS workers and the public.
'It is not a done deal but the Government has revealed its hand for the first time. With the time remaining before the Pay Review Body recommendation, the Government can expect a backlash from a million NHS workers.
'Taxpayers are supportive of a significant and fair pay rise for NHS workers – this year of all years.
In its submission to the NHS Pay Review Body today, the DHSC said that any higher than one per cent 'would require re-prioritisation' and said pandemic had created 'unavoidable impact'
'If the Pay Review Body accepts the Government view, a pay award as poor as this would amount to only an extra £3.50 per week take-home pay for an experienced nurse. Nobody would think that is fair in the middle of a pandemic and it will do nothing to prevent the exodus from nursing.'
A Government spokesman said: 'Over one million NHS staff continue to benefit from multi-year pay deals agreed with trade unions, which have delivered a pay rise of over 12 per cent for newly-qualified nurses and will increase junior doctors' pay scales by 8.2per cent.
'Pay rises in the rest of the public sector will be paused this year due to the challenging economic environment, but we will continue to provide pay rises for NHS workers, on top of a £513 million investment in professional development and increased recruitment.
'That's with record numbers of doctors and 10,600 more nurses working in our NHS, and with nursing university applications up by over a third.
'The independent pay review bodies will report in late spring and we will consider their recommendations carefully when we receive them.'
In the document, the DHSC says the pandemic has 'placed a huge strain on both public and NHS finances'.
'The economic outlook for 2021/22 remains uncertain and pay awards must be both fair and affordable,' it wrote.
'The government announced a pause in public sector pay rises for all workforces, with an exception for employees with basic full-time equivalent salaries of £24,000 or under and for the NHS.
'In settling the DHSC and NHS budget, the government assumed a headline pay award of 1 per cent for NHS staff. Anything higher would require re-prioritisation.'
They added that this increase was still above the CPI rate of inflation, whilst some staff would see a higher rise under a previously-agreed deal.
Around 1.3 million public sector workers will see a pay freeze while those earning less than £24,000 guaranteed a pay rise of at least £250.
Unite assistant general secretary Gail Cartmail said: 'The Government's evidence to the NHS Pay Review Body, due to report in May, saying that it wants the pay of NHS staff pegged at 1 per cent, is callous and takes no account of the public mood.'
Dr Chaand Nagpaul, who chairs the British Medical Association council, said: 'This is a total dereliction of the Government's moral duty and obligation to a workforce that is keeping the NHS on its feet and patients alive.'
He added: 'This comes as a kick in the teeth after a decade in which doctors have experienced real terms pay cuts of up to 30% and in the same week as the Chancellor has announced a huge increase in the taxation on doctor's pensions that will leave virtually all doctors worse off.'
Rachel Harrison, GMB National Officer, said: 'This news will come as yet another kick in the teeth for NHS workers.
'A day after the Budget giveaways for some, the Government is attempting to impose either a 1 per cent pay rise on NHS workers or more cuts after a decade of austerity.
'Our members in the NHS have risked everything to battle the coronavirus and keep the public safe – a below inflation rise would be a paltry insult.'
Health Minister Nadine Dorries said the Government 'would love to do more' than a proposed 1 per cent pay rise for NHS staff in England 'but at this present point in time it's been fighting the pandemic for the past year which has been a priority'.
Ms Dorries told the BBC's Today Programme: 'I trust the Chancellor, I trust him in handling the nation's purse strings.
'All of us, the Prime Minister, the Chancellor, I don't think there's any of us who have not been touched or have needed NHS services over the past year.
'The Chancellor believes that this is what we can afford to pay NHS staff across the board, and this is our recommendation to the pay review body, we will have to see what the pay review body come back and say, and we're also waiting for feedback from unions and all stakeholders across the sector.'