According to The Telegraph, Osborne will say public sector employees in "poorer parts of the country" should have their pay frozen until it is brought into line with local private sector workers.
Osborne originally intended to introduce local pay rates in April 2013, but has decided to bring the plans forward by a year in an attempt to boost growth.
But trade unions have reacted with anger to the prediction. Public sector union Unison has warned Osborne needs "a reality check".
Dave Prentis, general secretary of Unison, said: "If the Chancellor wants to stimulate economic recovery in his Budget, local pay bargaining is not the way to do it. Local pay pushes depressed areas further into depression by cutting off spending in local businesses.
"In the NHS nurses, paramedics, therapists and midwives are among the workers suffering for a second year without any increase in pay, to compensate for rising costs. The dismantling of Agenda for Change would be the Government's final nail in the coffin of our NHS.
"Local Government workers already face a third year without a pay rise and cutting pay further, will take many more families onto the breadline and onto benefits, with taxpayers picking up the bill.
"The Chancellor would risk plunging the whole of the public sector back into a recruitment crisis if pay is depressed any further. There is a whole raft of jobs where pay in the private sector is considerably higher. "The Budget should be used to stimulate the whole of the economy, not depress parts of the country further."
