Rachel Reeves has called off her planned pension tax raid after being warned that it would unfairly impact up to a million teachers, nurses and other public sector workers.

The Chancellor had planned to raise funds by reducing tax relief on those earning £50,000 or more per year.

But senior Treasury officials said the move would disproportionately hit those who have given their careers for the state.

The original proposals would have seen public sector workers on £50,000 a year face an additional annual tax bill of £1,000.

But last night a senior government figure said it would be 'madness' to inflict large tax rises on workers who have just been handed a pay rise, according to The Times.

Former Pensions Minister Steve Webb said: 'I don't think this is something that Reeves will want to do, not least because it will infuriate public sector unions just weeks after the government agreed pay settlements with them.'

Union leaders are also believed to have warned the Treasury against the proposal.

'Attacking our pensions in this way would completely reverse this progress by once again taking money away from doctors in a different way,' Vishal Sharma, chair of the BMA pensions committee, said.

'Not only would this negate the recent hard-won pay rises but it would likely reignite the recent pay disputes that have been seen across the NHS.;'

The move would have raised similar concerns to Labour's original proposal to reintroduce a cap on the lifetime allowance on pension savings - something that was dropped during the election campaign amid concerns that doing so would hit junior doctors.

Treasury officials are still looking at ways to raise enough tax revenue to cover what Labour calls a £22billion black hole in the public finances.

One way to do this could include reducing the amount of money people are allowed to take out of their pension pots tax free when they retire, currently set at £268,275. The scheme costs the exchequer £5.5billion a year.