Video report by ITV News Political Editor Robert Peston
MPs have voted against a Labour amendment to the Queen's Speech to force the Government to drop the pay cap on public service workers.
The vote was the first test of Theresa May's minority Government. The $1 billion funding deal with the DUP helped see off the Labour proposal by 323 votes to 309, a majority of 14.
Earlier the Government had confirmed the long-standing pay cap on public sector salaries would stay, despite earlier suggestions it could be scrapped.
Labour accused the Government of a "shambles" amid the confusion surrounding the future of the 1% cap on annual rises.
Theresa May's official spokesman played down rumours that a review of the cap was likely, insisting "the policy has not changed" despite an earlier statement from the Prime Minister that she was ready to listen to recommendations from the independent bodies that review public sector pay.
The Treasury confirmed the policy would remain unchanged.
Earlier, a Number 10 spokesperson said the Prime Minister accepted voters were "weary" of austerity.
He indicated there would be decisions in Chancellor Philip Hammond's Budget in the autumn.
Several Tory ministers, including Sir Michael Fallon and Chris Grayling, have suggested the Government would have to consider whether to persist with the cap, which is currently due to remain in place until 2019/20.
The Labour amendment to the Queen's Speech called for an end to public sector pay restraint, which saw a two-year freeze in 2010, followed by years of 1% caps on annual rises.
Shadow chancellor John McDonnell said: "This war between Number 10 and the Treasury isn't sustainable. Shambles," said Mr McDonnell.
And Liberal Democrat Leader Tim Farron said: "The Tories are in utter chaos. They have U-turned on their own U-turn within the space of a few hours."
The Downing Street source said: "Ministers, including the Prime Minister and the Chancellor, have been clear that we are going to listen to the messages that were sent at the election.
"We understand that people are weary after years of hard work to rebuild the economy."
Asked whether the cap would be reviewed for future years, he added: "Public sector pay restraint is one of the tough choices we've had to make to balance the books after Labour's crash and what was left behind. We are working through and looking at recommendations from pay review bodies that are coming."