The government should plunder undergraduate tuition fees to fund a 25% pay rise for teachers willing to work in challenging schools, Alan Milburn, the government's social mobility champion, has proposed.

Milburn, who chairs the social mobility and child poverty commission, said in a speech on Thursday that radical approaches were needed to close the educational attainment gap between disadvantaged children and their better-off classmates.

"National pay bargaining has not helped to narrow the attainment gap. The old orthodoxy is not working. The current government's laissez-faire approach of giving schools more freedom and then sitting back to see what happens is not working either," Milburn told a Policy Exchange conference in London.

He proposed that the next government should require the teachers' pay review body to set new pay grades "for the best teachers to work in challenging schools in the hardest-to-recruit areas", along with what he called the teachers' pay premium: offering 2,000 experienced teachers a 25% pay rise if they agree to teach in a challenging school.