Theresa May has said she recognises the “sacrifice” made by public sector workers as Jeremy Corbyn urged her to lift the 1% cap on their wages.
In the last PMQs before the summer break, Mr Corbyn said people were held back by low pay and accused ministers of a “lack of touch with reality”.
Mrs May said she, like the Labour leader, valued public services.
“The difference is on this side of the house we know we have to pay for them,” she added.
Mrs May is seeking to restore order to her party following a series of leaks and negative briefings, with Chancellor Philip Hammond reported to have told a private cabinet meeting public service workers were “overpaid”.
Mr Corbyn asked whether, given the “squabbling” inside government, Mr Hammond had been talking about Mrs May’s ministers.
He urged her to lift the cap on wage rises and cited the case of a nurse living with pay restraint for seven years.
“I look along that front bench opposite and I see a cabinet bickering and backbiting while the economy gets weaker and people are pushed further into debt,” he added.
Mrs May said she recognised the sacrifices made by public servants towards reducing the deficit. She said the Tories had a “record to be proud of” and accused Labour of unfunded spending pledges.
“The government doesn’t seem to have any problem paying for DUP support,” Mr Corbyn replied, in a reference to the £1bn package that secured the Democratic Unionist Party’s backing for the Tories’ minority administration.
Parliament goes into recess on Thursday and returns on 5 September.
Mrs May, under pressure since losing her Commons majority last month, has warned ministers and MPs that any “backbiting” between party figures could let Mr Corbyn into Downing Street.
During PMQs, Labour MP Ian Murray referred to her as the “interim prime minister” when he asked his question.
BBC assistant political editor Norman Smith said there was now “something of a backlash” from MPs towards the “big beasts” thought to be manoeuvring themselves behind the scenes to replace her.
“I sense there’s a real pushback now to keep her in place at least for the short to medium term,” he added.
A senior backbencher, 1922 Committee vice-chairman Charles Walker, said Mrs May would have MPs’ backing if she sacked plotting ministers.
And Defence Secretary Sir Michael Fallon called for military discipline from the cabinet ranks to confront the “dangerous enemy” of Mr Corbyn.