Liz Truss has said she wants to save taxpayers’ money by scrapping diversity roles and ending national pay deals.
The Tory leadership candidate wants to link civil servants’ pay to living standards where they work, meaning similar jobs could have different salaries depending on location
Ms Truss says that the scheme could be rolled out to other public sector areas, saving £8.8bn a year.
Labour called her plan “a fantasy recipe for levelling down”.
The party’s deputy leader Angela Rayner said it would reduce “the pay of Northerners, worsening the divide which already exists”.
The FDA – the union for senior civil servants – said it was “astounding” Ms Truss was planning to move jobs out of London while at the same time cutting regional pay.
And a source close to the Rishi Sunak campaign said the plans would mean “stretching the NHS to breaking point and fewer police fighting crime as we head into a general election”.
The Truss camp have argued that introducing regional pay would stop the public sector crowding out the private sector in places where private businesses can’t compete with public sector pay.
Alex Thomas of the Institute for Government think tank said the idea of regional pay was an idea that “comes around every few years”.
“The reason why chancellors and prime ministers have previously tended to abandon it is the benefits are pretty marginal – both in terms of the cost you can save and the benefits to the local economy.”
Ms Truss has also been criticised for describing Scotland’s First Minister Nicola Sturgeon as an “attention-seeker”.
Scotland’s deputy first minister John Swinney said he was “absolutely horrified” and described the comments as “obnoxious”.
Ms Truss is competing with former Chancellor Rishi Sunak to become the next Conservative leader, and prime minister.
The party’s 160,000 or so members are voting on which of the two they want to replace Boris Johnson, and the winner will be announced on 5 September.
Liz Truss pledges civil service pay shake-up