Liz Truss has scrapped a plan to link public sector pay to local living costs following a backlash from Tory MPs and opposition parties.
The Tory leadership candidate had proposed regional pay boards, in a bid to save taxpayers a potential £8.8bn.
But the policy was criticised by several senior Tories, who argued it would mean lower pay for millions of workers outside London.
Ms Truss has now said the proposal would not be taken forward.
The foreign secretary told the BBC the plan had been "misrepresented" and people had been "unnecessarily worried about my policies".
"I never had any intention of changing the terms and conditions of teachers and nurses," Ms Truss said. "But what I want to be clear about it that I will not be going ahead with the regional pay boards."
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.
It's not the U-turn, it's the fact that she actually thought it was a good policy in the first place. Anyone could spot the major flaw in the idea, in fact, just about everyone in the country could see it but apparently not the person who may well be running the country next month. It was stupidity of epic proportions. On a scale of 1 to 10 of really stupid ideas, it was a 20!