The country's biggest teaching union today threatened strike action after describing a new pay settlement offered by the Government as a wage cut which would reduce teachers' standard of living.

The National Union of Teachers (NUT) promised a "robust" response at a meeting of its executive next week after Ed Balls, the Schools Secretary, announced a settlement of 2.45 per cent for 2008.

The Minister added that teachers in England and Wales would receive 2.3 per cent rises in 2009 and 2010 under the three-year deal. The figures were lower than the previous pay award for teachers of 2.5 per cent but higher than many had expected.

The NUT expressed fury over the announcement, stating that it would do nothing to assist teacher retention or recruitment.

The NUT told Times Online: "We previously said that there was potential for a [strike] ballot. There is going to be a meeting next week. There may be developments then." A spokesman said that the NUT would confirm later whether the executive meeting would discuss a ballot for strike action.

"Teachers will be worse off. This pay settlement of 2.45 per cent for 2008 is well below the rate of inflation of four per cent, which was also announced today," Steve Sinnott, the General Secretary of the NUT, said in a statement.

"This will reduce the standard of living for teachers and exacerbate the problems of recruitment and retention.

"Teachers have to pay increases in the cost of housing, fuel and food. This settlement is in effect a pay cut. There cannot be a return to the days of 'boom and bust' in teachers’ pay."

He added: "The NUT Executive will be meeting next week and I have no doubt they will want a robust response."

The standoff with teachers marks the latest battle being fought by the Government with public sector workers over pay. Last year, the Police Federation announced that every officer in England and Wales was to be balloted over whether to lobby for the right to strike.

Then, last month, more than 20 unions representing millions of public sector workers signed a statement calling on ministers to raise wages.

However, defending the award today, Mr Balls said it was both "fair and affordable".

"Today’s pay award will enable teachers and schools to plan ahead with a greater degree of security and certainty and at the same time will help deliver stability for the taxpayer and the wider economy," he said.

"I believe this pay award, the first of the Government’s three-year, forward-looking, public sector pay awards, is fair for teachers and affordable for schools.

"It builds on the record real terms pay increases that teachers have been awarded during the last 10 years."

Despite the fact that the settlement was lower than previously afforded to teachers, it was still above the Government’s preferred measurement of inflation, the consumer prices index, which is running at 2.1 per cent.

Gordon Brown had previously called for public sector salaries to be capped at 2 per cent to keep inflation under control.

However, Mr Balls said he had accepted recommendations from the independent School Teachers Review Body, which advises the Government on pay for school staff, to give a better pay settlement.

The deal means that there will be a minimum starting salary of £25,000 for teachers in inner London and £24,000 for teachers in outer London from September.

Mr Balls also proposed a review of the current pay bands for teachers, taking into account local recruitment needs.

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