The three per cent pay rise for health staff will be paid for from within the NHS budget, Downing Street said on Thursday.
The confirmation risks sparking a fresh row over the hike.
No10 insisted the money would not be diverted from funds “already earmarked” for the NHS frontline.
But the revelation left open from where the funding would be found in the NHS budget.
The Prime Minister’s official spokesman said: ““The pay uplift will be funded from within the NHS budget.
“But we are very clear that it will not impact funding already earmarked for the NHS frontline.
“We gave the NHS a historical settlement in 2018 which saw its budget rise by £33.9 billion by 2023/24...we provided £92 billion to support the NHS and social care through the pandemic.”
Pressed if the pay settlement was not being funded from NHS frontline expenditure, where it would come from, he added: “It will be funded from within that budget but it won’t stop any funding that has been eamarked for the frontline from taking place.”
There is “no way” the NHS can pay for the planned three per cent pay rise for staff out of its own budget, health chiefs warned on Thursday.
The Government has announced that nurses, paramedics, consultants and other NHS staff will get the rise while other public sector workers, such as police, will see their pay frozen.
However, nurses and trade unions said it is not enough and are threatening to strike following the offer to NHS staff in England and Wales.
Big questions remain over where the money will come from and there have been suggestions it could be funded through a mooted increase in National Insurance that was intended to pay for the overhaul of social care.
The chief executive of NHS Employers, an organisation that supports NHS leaders, suggested the health service could not fund the pay rise through “efficiencies”.
Danny Mortimer told BBC Radio 4’s Today programme: “The key question is: Is the Government going to fund this pay award properly?
“What we can’t have is a situation where the assumption is that the NHS will make efficiencies, will cut the number of staff or reduce the services it provides to pay for this pay award.
“What we can’t have is a situation where some parts of the NHS, particularly the services that provide specialist public health services, don’t receive the pay award in the same way that my members who run services in hospitals do.”
Former NHS Trust chairman Roy Lilley told Talk Radio: “The NHS only has a budget up until September because there’s been no spending review. The NHS doesn’t know what money it’s going to get after September, so it doesn’t know how it’s going to pay for this uplift.”
He added: “If it’s three per cent, you’re looking at about probably £2 billion. There’s no way the NHS can find £2 billion to pay this.”
The Times reported on Thursday that the rise was likely to be funded from an increase in National Insurance that was intended to pay for social care reforms.
Asked if taxes were going to increase to fund the pay rise, Business Secretary Kwasi Kwarteng told BBC Breakfast: “I don’t think they are because if the economy continues to perform strongly, if it can grow, our tax receipts will grow without having to put up tax rates. So, it means that we can afford a little bit more.”
Pressed on where the money will come from, Mr Kwarteng replied: “I’m not going to write a future budget on the 22nd of July.”