CONFIRMATION that Gordon Brown intends maintaining his Iron Chancellor image, by keeping the Budget in surplus in the face of loud calls for extra public spending, came yesterday from Downing Street.

Mr Brown's tough approach prompted fears among public sector workers' leaders that they face years of tight pay settlements, and a Liberal Democrat accusation that the Chancellor was indulging in ''fiscal flagellation''.

It also coincided with TUC calls for increased public sector spending and news that Essex fire-fighters are to strike next Monday over budget cut-backs that threaten jobs.

The Chancellor is understood to have told Cabinet colleagues he intends to maintain the stringent financial discipline of Labour's first year in office by requiring the public finances to remain in surplus every year for the next four years.

Not surprisingly Rodney Bickerstaffe, general secretary of the public services union Unison, was alarmed by the implications.

''We were given the clear impression that for two years, and two years only, the straitjacket of the last Government's public spending limits would be followed. It would be disappointing, and unnecessary, should the Government suggest that a further straitjacket will be imposed,'' said Mr Bickerstaffe.

''This year public service pay increased by only 2.6% compared to 5.6% in private companies. They don't want massive pay levels or huge numbers of extra jobs created for the sake of it. They want a decent day's pay for a decent day's work and the means to be able to carry on providing quality services to the public who, of course, vote in elections.

''Prudence and caution have their place, but there needs to be some balance introduced. Boardroom pay, obscene City bonuses and unearned share options at one end, and heavy, not to say iron-handed restraint for the poorest is a recipe for disaffection.''

Mr Brown is insisting that current spending - excluding public investment - should not merely be in balance but in substantial surplus.

As well as keeping tight control on public sector pay, that is likely to mean that Mr Brown will demand multi-billion pound cuts to several of the departmental budget bids submitted in Whitehall's comprehensive spending review. Even the health and education budgets, where the Ministers are thought to be looking for up to #9000m each, may come under close scrutiny.

Mr Blair's official spokesman dismissed Liberal Democrat talk of Mr Brown storing up a #50bn war-chest to finance a spending splurge later in the Parliament as ''Teletubbies plus''.

However David Laws, the Liberal Democrats' economics adviser, said their economics spokesman Edward Davey had written to Giles Radice, chairman of the Commons treasury select committee, suggesting that he invite Mr Brown to give evidence to the committee on the Government's economic strategy.

''The Government's fiscal policy appears to have changed over this weekend This seems like fiscal flagellation, bringing us surpluses for the sake of it.''

The TUC yesterday urged the Government to increase public spending to help achieve a fairer society with more committed to education and communities, and benefits linked to earnings.

In its submission to the Government's spending review, the TUC said that public spending should be increased by 3% a year in real terms as Britain spends less on social welfare than almost any other country in Europe and was top of the European league for child poverty.

General secretary John Monks said the Government had to make a ''fundamental choice'', adding: ''If it does not increase public spending then we face growing inequality and poverty and more social exclusion.''

The Essex firefighters are to strike after voting overwhelmingly to take industrial action in protest at plans to cut more than #1m from the authority's budget, which will lead to job losses. Military Green Goddess fire engines will be drafted in as emergency cover during the four-hour strike.