London Daily

Focus on the big picture.
Friday, Oct 02, 2026

Why did Liz Truss U-turn over public sector pay?

Why did Liz Truss U-turn over public sector pay?

Tory leadership candidate Liz Truss has dropped a plan to link public sector pay to local living costs, just hours after it was announced.

Last night, her campaign team announced a proposal for regional pay boards, saying this could save nearly £9bn a year.

But the idea attracted criticism from unions, Labour and some Tories. The Conservative Mayor of Tees Valley (and Rishi Sunak supporter) Ben Houchen called it a "sure fire way to lose the next general election."

But now, Ms Truss says: "I never had any intention of changing the terms and conditions of teachers and nurses. But what I want to be clear about is I will not be going ahead with the regional pay boards. That is no longer my policy".


So what was the plan?


At the moment, workers in the public sector get the same amount regardless of where they live - apart from in London, where they receive a London Weighting payment (about £5,000 for a teacher on a starting salary in inner London, for example).

The plan was to introduce regional pay boards, so you could pay less to people who live in areas with a lower cost of living.

A press release from the Truss campaign team said this would have applied to new employees and would be rolled out in the civil service.


It said that savings of £8.8bn a year could be made, "if the system were to be adopted for all public sector workers in the long term".

And it added that the policy would "avoid the public sector crowding out the private sector in places where private business just can't compete with public sector pay".


Where did it come from?


The £8.8bn figure appears to come from a report by the Taxpayers' Alliance - a campaign group which supports cuts in taxes and spending.

The report was looking for ways to narrow the gap between pay in the public sector (people employed by the government including civil servants) and everybody else.

The group says its £8.8bn was worked out by taking a figure of £6.3bn in savings from a report by Policy Exchange in 2012 and increasing it to account for "growth in the public sector pay bill" since then.

That 2012 report found that equalising pay between the public sector and the private sector could save the government £4.2bn from reducing the pay of people in the public sector being paid more than their counterparts in the private sector.

But it also said it would cost the government £8bn to increase the pay of those in the public sector paid less than their private sector counterparts. So that would mean an overall cost to the government of £3.8bn a year.

The way Policy Exchange reached the overall saving of £6.3bn was by adjusting for the better pension provision in the public sector.


Comparing pay


The Taxpayers' Alliance report also claims that pay was 14.1% higher "for public sector staff compared to their private sector equivalents in 2021".

That's not quite right - the 14.1% figure is for all public sector employees compared with all private sector employees (it's table 25.7a here), but it's not comparing people with their equivalents.

The Institute for Fiscal Studies published an analysis that did compare workers with their "equivalents" - they adjusted for the sorts of qualifications and experience people had.


They found that on the eve of the pandemic the gap between public and private sector pay once the characteristics of the workers had been taken into account was only 0.9%.

The figure is pre-pandemic, but that's probably sensible because the pandemic had big, distorting effects on pay throughout the economy.

That figure is an average across the country. There are regional differences, with public sector staff based in London, the South East and the East of England earning less than the regional average and those in the rest of the UK earning more, according to IFS analysis.


Technical difficulties


It's likely that implementing the plan across the public sector would have created problems in recruitment.

The IFS has argued that current plans for civil service pay already risk causing challenges for recruitment and retention.

The idea of regional pay was considered by then Chancellor George Osborne in 2012. But it was dropped after opposition from unions and northern Tory MPs.

Alex Thomas from the Institute for Government called the regional pay board plan "really complicated and quite controversial".

"If you want to rebalance pay so that you're paying the regional market rate in different parts of the country, that's either going to come from nurses and teachers being paid less or seeing their pay increase less than others in the private sector," he said.

"I think the reason why chancellors and prime ministers have tended to abandon it is the benefits are pretty marginal both in terms of the costs you can save and the benefits to the local economy."

We have approached the Truss campaign for comment about why they abandoned the plan but have not yet heard back from them.

Newsletter

Related Articles

0:00
0:00
Close
Scottish Court to Rule on Bid to Force No-Confidence Vote Against Aberdeen Council Co-Leader
UK Bans Extra Charges for Seating Children Under 12 Beside Accompanying Adults
UK Introduces Vaping Duty and New Licensing Requirements
Greggs to Close Four UK Factories and Cut 740 Jobs
Hundreds of Prisoners Released Early as England and Wales Prisons Reach 98% Capacity
UK Unveils New Russia Sanctions Targeting War Funding and Shadow Fleet
Burnham Says There Are Strong Indications of Iranian Involvement in RAF Fairford Security Breach
Prime Minister Andy Burnham Raises Prospect of Reviewing Britain's Post-Brexit EU Relationship
Markets Price in Bank of England Rate Increases as Inflation Rises to 3.1%
UK Borrowing Costs Climb Toward 5.5% as Global Bond Sell-Off Intensifies
UK-France One-In-One-Out Migration Agreement Expires as London Seeks Alternative Measures
Southwest England Faces Flood Alerts After Heavy Autumn Storms
UK Expands Funding for Rapid Electric Vehicle Charging Infrastructure
Welsh Government Approves Funding to Upgrade South Wales Transport
Northern Ireland Tensions Rise as Orange Order Rejects Drumcree Compromise
NHS Leaders Back Early Design of Proposed National Care Service
More Than One-Third of Regional UK Universities Face Financial Deficits
UK Current Account Deficit Narrows as Cross-Border Financial Flows Remain Strong
Bank of England and FCA Issue New Rules for Stablecoins and Digital Assets
MI5 Warns UK Universities Over Research Links With Chinese Institutions
UK Energy Price Cap Rises 4% as Electricity VAT Is Temporarily Suspended
Equity Calls for UK Personality Rights to Protect Performers From AI Replication
OpenAI Pauses Advanced Model Training Following Safety Concerns
Scottish Government Proposes Replacing 32 Councils With Larger Regional Authorities
Ofgem Raises UK Household Energy Price Cap by 4% From October
UK Counter-Terrorism Police Continue Investigation After Five Arrests Near RAF Fairford
OECD Cuts UK 2027 Growth Forecast to 1%
Labour Says State Pension Triple Lock Remains Protected Through Current Parliament
Andy Burnham Pledges National Care Service With Free Social Care in England
Six Flags Permanently Shuts Landmark X2 Roller Coaster Following Safety Scandals
Metropolitan Police Rule Out Terrorism in Golders Green Stabbing Investigation
Lithium-Ion Battery Identified as Cause of Fatal Merseyside House Fire
UK Department Rejects New Sea Use Framework Due to Stakeholder Fatigue
Major Thames Water Pipe Burst Causes School Closures in London
Aldi Commits £900 Million to Expand UK Supermarket Network
Scottish Affairs Committee Warns Skills Shortages Threaten Defence Sector Expansion
Parliamentary Committee Warns Northern Ireland Budget Deadlock is Stalling Economic Growth
NHS Hospitals in England Face Severe Shortages of Essential Medications
Home Secretary Signals Major Overhaul of UK Immigration and Leave to Remain Policies
Chancellor Promises New Job Schemes Alongside Strict Fiscal Discipline
Energy Secretary Proposes Taxpayer-Funded Green Transition and National Electricity Grid
UK Government to Renationalise Avanti West Coast Railway Franchise in March
Prime Minister Andy Burnham Pledges Major Social Care and Infrastructure Reforms
Five Suspects Released on Bail Following Alleged Bomb Plot Near RAF Fairford
UK Diesel Prices Hit Record High of 199p Per Litre
Transport for Wales and Network Rail Complete Electrification of South Wales Metro
Defra Expands Incentives for Sustainable Farming and Biodiversity in England
Northern Ireland Executive Approves Funding Package to Resolve Public Sector Pay Disputes
Universities UK Warns of Financial Insolvency Risks for Higher Education Institutions
UK Prisons Activate Emergency Protocols to Manage Capacity Pressures
×