London Daily

Focus on the big picture.
Wednesday, Dec 24, 2025

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
UK Mortgage Rates Edge Lower as Bank of England Base Rate Cut Filters Through Lending Market
U.S. Supermarket Gives Customers Free Groceries for Christmas After Computer Glitch
Air India ‘Finds’ a Plane That Vanished 13 Years Ago
Caviar and Foie Gras? China Is Becoming a Luxury Food Powerhouse
Hong Kong Climbs to Second Globally in 2025 Tourism Rankings Behind Bangkok
From Sunniest Year on Record to Terror Plots and Sports Triumphs: The UK’s Defining Stories of 2025
Greta Thunberg Released on Bail After Arrest at London Pro-Palestinian Demonstration
Banksy Unveils New Winter Mural in London Amid Festive Season Excitement
UK Households Face Rising Financial Strain as Tax Increases Bite and Growth Loses Momentum
UK Government Approves Universal Studios Theme Park in Bedford Poised to Rival Disneyland Paris
UK Gambling Shares Slide as Traders Respond to Steep Tax Rises and Sector Uncertainty
Starmer and Trump Coordinate on Ukraine Peace Efforts in Latest Diplomatic Call
The Pilot Barricaded Himself in the Cockpit and Refused to Take Off: "We Are Not Leaving Until I Receive My Salary"
UK Fashion Label LK Bennett Pursues Accelerated Sale Amid Financial Struggles
U.S. Government Warns UK Over Free Speech in Pro-Life Campaigner Prosecution
Newly Released Files Shed Light on Jeffrey Epstein’s Extensive Links to the United Kingdom
Prince William and Prince George Volunteer Together at UK Homelessness Charity
UK Police Arrest Protesters Chanting ‘Globalise the Intifada’ as Authorities Recalibrate Free Speech Enforcement
Scambodia: The World Owes Thailand’s Military a Profound Debt of Gratitude
Women in Partial Nudity — and Bill Clinton in a Dress and Heels: The Images Revealed in the “Epstein Files”
US Envoy Witkoff to Convene Security Advisers from Ukraine, UK, France and Germany in Miami as Peace Efforts Intensify
UK Retailers Report Sharp Pre-Christmas Sales Decline and Weak Outlook, CBI Survey Shows
UK Government Rejects Use of Frozen Russian Assets to Fund Aid for Ukraine
UK Financial Conduct Authority Opens Formal Investigation into WH Smith After Accounting Errors
UK Issues Final Ultimatum to Roman Abramovich Over £2.5bn Chelsea Sale Funds for Ukraine
Rare Pink Fog Sweeps Across Parts of the UK as Met Office Warns of Poor Visibility
UK Police Pledge ‘More Assertive’ Enforcement to Tackle Antisemitism at Protests
UK Police Warn They Will Arrest Protesters Chanting ‘Globalise the Intifada’
Trump Files $10 Billion Defamation Lawsuit Against BBC as Broadcaster Pledges Legal Defence
UK Says U.S. Tech Deal Talks Still Active Despite Washington’s Suspension of Prosperity Pact
UK Mortgage Rules to Give Greater Flexibility to Borrowers With Irregular Incomes
UK Treasury Moves to Position Britain as Leading Global Hub for Crypto Firms
U.S. Freezes £31 Billion Tech Prosperity Deal With Britain Amid Trade Dispute
Prince Harry and Meghan’s Potential UK Return Gains New Momentum Amid Security Review and Royal Dialogue
Zelensky Opens High-Stakes Peace Talks in Berlin with Trump Envoy and European Leaders
Historical Reflections on Press Freedom Emerge Amid Debate Over Trump’s Media Policies
UK Boosts Protection for Jewish Communities After Sydney Hanukkah Attack
UK Government Declines to Comment After ICC Prosecutor Alleges Britain Threatened to Defund Court Over Israel Arrest Warrant
Apple Shutters All Retail Stores in the United Kingdom Under New National COVID-19 Lockdown
US–UK Technology Partnership Strains as Key Trade Disagreements Emerge
UK Police Confirm No Further Action Over Allegation That Andrew Asked Bodyguard to Investigate Virginia Giuffre
Giuffre Family Expresses Deep Disappointment as UK Police Decline New Inquiry Into Andrew Mountbatten-Windsor Claims
Transatlantic Trade Ambitions Hit a Snag as UK–US Deal Faces Emerging Challenges
Ex-ICC Prosecutor Alleges UK Threatened to Withdraw Funding Over Netanyahu Arrest Warrant Bid
UK Disciplinary Tribunal Clears Carter-Ruck Lawyer of Misconduct in OneCoin Case
‘Pink Ladies’ Emerge as Prominent Face of UK Anti-Immigration Protests
Nigel Farage Says Reform UK Has Become Britain’s Largest Party as Labour Membership Falls Sharply
Google DeepMind and UK Government Launch First Automated AI Lab to Accelerate Scientific Discovery
UK Economy Falters Ahead of Budget as Growth Contracts and Confidence Wanes
Australia Approves Increased Foreign Stake in Strategic Defence Shipbuilder
×