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David Cameron is facing a complete breakdown in relations with his mandarins as a secret blueprint to break up the civil service is revealed today.

The plans put the country's 434,000 civil servants into four geographical pay zones, with those living in the south-west, on the south coast, Wales, much of the Midlands and the north-east earning least. Those in inner and outer London will be highest paid, followed by civil servants working in a corridor stretching from Bristol to the Thames estuary, and those in pay "hotspots" in Manchester and Birmingham.

The Cabinet Office's Reward, Efficiency and Reform Group (Rerg), assisted by the Hay Group private consultancy, has drawn up a "local pay map" that will form the basis for how civil servants' pay is set for the next three years. It is understood ministers are working on estimates that show average earnings in the north-east are 10% lower than the UK average, 6% lower in the West Midlands, and 7% lower in Yorkshire and the Humber.

However, the plans threaten to push relations with the civil service – already strained over the reform agenda – to breaking point.

Ian Watmore, 53, who was in charge of cutting costs across departments and headed Rerg, quit last week, six months after he became permanent secretary at the Cabinet Office, following a series of disagreements with his minister, Francis Maude.

Huge consternation has followed the leaking of details last week of a fiery meeting between Sir Bob Kerslake, head of the civil service, and the prime minister's director of strategy, Steve Hilton.

Hilton, who left Downing Street last week, is reported to have proposed that 90% of the work done by civil servants could be outsourced to thinktanks, charities and private companies.

On Saturday, the shadow cabinet office minister, Gareth Thomas, said the government was in danger of losing any remaining goodwill and appeared to be "waging war on the pay of hard-working, often lowly paid, public servants".

A Cabinet Office spokesperson said: "We don't comment on leaks. In the civil service, pay is usually set on a 'one size fits all' basis at a national level, whereas in the private sector pay is set in accordance with local labour markets. This means civil servants are often paid more than private sector workers in similar jobs in the same area, which has the potential to hurt private sector businesses."

(Read by Nelly Min. Nelly Min is a journalist at the China Daily Website.)

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(Agencies)