Alistair Darling is to face down trade union demands for public sector pay rises by saying that he will not take unnecessary risks with the economy.

Addressing the Trades Union Congress today, the Chancellor will attempt to mollify delegates by urging them not to forget the support Labour has given to workers over the past 11 years. He will also agree with Brendan Barber, the TUC General Secretary, that borrowing should be allowed to rise to support the economy.

But Mr Darling and the Prime Minister, who is attending the TUC General Council dinner this evening, expect a frosty reception after union delegates vented their anger yesterday over rising prices and workers' rights.

The Government's insistence that public sector pay will remain below 2 per cent was denounced by unions such as Unite and Unison - which together provided a quarter of the Labour Party's funding last year. The conference agreed to organise days of action against the pay policy, including a demonstration.

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Keith Sonnet, of Unison, said that nurses, teachers, cleaners and other public servants “deserve better than the shabby treatment they are getting from a Government that appears to listen more to the voices of their fair-weather friends in business than it does to its core supporters”.

Mr Darling will insist that the Government must keep inflation under control - but pledge that the Government will do “what it can” to help through this difficult period. The Chancellor will say: “Sustainable growth, higher employment, better living standards, more investment in health, transport, housing and education - these are all essential if we are to build the fairer society we want to see.

“We should not forget what together we have achieved over the past 11 years. That is why I am determined that we should not put those achievements at risk by taking unnecessary risks with economic stability.”

Privately, trade union leaders are frustrated, believing the Government to be in disarray and that it could do much more to help workers.

George Osborne, the Shadow Chancellor, has published an open letter to union members, arguing that his party's values are shared among them. Mr Osborne said: “Social justice is at the heart of the modern Conservative message. If you share these values, and want to see them embodied by a new progressive government, you are welcome in the Conservative Party.” The party has sent its trade union envoy, Richard Balfe - the former MEP who defected from Labour to the Conservatives - to monitor debates and build union links with the party.

To coincide with the visit by Gordon Brown and the Chancellor, Britain's biggest union is stepping up demands today for a windfall tax on the power companies. Unite has released a dossier claiming that the profits of the companies are now more than five times what they were five years ago.

The Government has resisted pressure for a windfall tax, instead offering measures to assist energy efficiency in the home. Analysis by Unite of energy companies' financial results shows that the profits of the leading energy providers have leapt from £557 million in 2003 to more than £3 billion now. The union says that for every price increase of 10 per cent a further 400,000 people fall into fuel poverty.

Tony Woodley, joint general secretary of the union, said: “The greedy oil companies have made tens of billions and in the next four years will make an extra £15 billion from the British public. The Government must intervene now and protect the most vulnerable in society.”

The conference backed a pledge to co-ordinate campaigning across the public services for higher pay. Several unions, including the civil service union PCS and the National Union of Teachers, raised the prospect of concerted industrial action this winter.

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