Business secretary Vince Cable has insisted the UK government will not “impose” lower pay on public-sector workers.
The Treasury is currently examining whether to bring in regional pay rates.
If the controversial move goes ahead, it could see public-sector workers being paid a different salary simply because of where they live.
The scheme has come under attack from the Welsh government as well as a number of unions in recent weeks - and been described as “divisive”.
During a visit to a steel recycling plant in Cardiff, Mr Cable accused his political rivals of scaremongering and claimed that fairness and flexibility were at the heart of the UK government’s plans.
He said: “There’s a lot of unnecessary fears about this.
“There is no question whatsoever of average low pay across Wales in the public sector being imposed from central government.
“All that’s happened so far is that the Treasury is putting in evidence between the difference between public and private-sector pay in different parts of the country.
“There is no commitment to do this and we are just looking at evidence.
“I think that scaring people in the public sector that they will have their pay depressed, is completely wrong.”