ReutersLiz Truss has scrapped a plan to link public sector pay to local living costs.
The Conservative leadership candidate had said she wanted to introduce regional pay boards, in a bid to save a potential £8.8bn.
However, there was a fierce backlash to the policy from several senior Tories, with one arguing it was “a sure-fire way to lose the next election”.
The Truss team have now said the proposal will not be taken forward.
A spokesperson for the leadership hopeful said there had been “a wilful misrepresentation of our campaign”.
They said: “Current levels of public sector pay will absolutely be maintained. Anything to suggest otherwise is simply wrong.”
Announcing the policy on Monday night, Ms Truss had said she wanted “a leaner, more efficient, more focused Whitehall” and set out plans which suggested savings of £11bn a year.
This included £8.8bn which would come from introducing regional pay boards, meaning that civil servant pay – and potentially later other public sector workers’ salaries – could be adjusted to reflect the area where civil servants work.
It could have seen workers in, for example, the south-west or north of England paid less than those in the south-east.
In addition to saving money, the Truss camp also argued it would help boost growth in areas, where the private sector had been crowded out by public sector salaries.
However, the proposal met with strong resistance from some Conservatives including Tees Valley mayor Ben Houchen who said it was “a sure fire way to lose the next general election”.
Mr Houchen – a supported of Mr Sunak – argued that “the idea that people in the north should somehow be paid less compared to counterparts in the south-east for doing the same job is completely counter intuitive to the levelling up agenda.”
And a source from Mr Sunak’s team said: “This wasn’t a mistake, Liz wanted this in 2018 [when she was a senior Treasury minister]. The lady is for turning.”
Liz Truss is widely thought to have been ahead in the Tory leadership race.
She had momentum in the campaign – and had avoided any significant errors.
Until now.
This policy has attracted huge criticism from opposition parties – and many Conservative politicians supporting Rishi Sunak.
They argued regional pay boards would have been “levelling down”.
Speaking to Mr Sunak’s allies this afternoon, they argue Ms Truss’s plans are unravelling and that it was a “catastrophic error of judgement”.
Team Sunak will hope this starts to change the dynamic of the campaign – and potentially put him back on the front foot just as Tory members start voting.
Team Truss will hope that junking the policy quickly will limit the damage.
A number of Conservative MPs in the south-west of England also attacked the policy, including Sunak ally Steve Double who said it would be “hugely damaging to public services in Cornwall, where we already struggle to recruit NHS staff”.
Another Sunak supporter – and former chief whip – Mark Harper said the Truss campaign should “stop blaming journalists” adding “reporting what a press release says isn’t ‘wilful misrepresentation'”.
Liberal Democrat leader Sir Ed Davey said: “U-turning on a multi-billion-pound policy five weeks before even taking office must be a new record.”
Mr Sunak and Ms Truss are vying for support from Conservative members to replace Boris Johnson as Tory leader and prime minister.
Ms Truss has been seen as the frontrunner, with several polls showing her to be more popular among the Conservative party membership.