It shouldn't be market rate because you get job safety. Most have never worked in private sector before and has no idea.
Salary should be dependent on Jobs nature and ability. Not by grade. Currently it is simply a power structure and hierarchy.
People should be promoted on merit. Unfortunately most working in public sector lack the ability to judge. If you think power play, bureaucracy and failing up is a thing in large enterprise. You haven't seen civil servant yet.
I cant remember which party it was but stopped the Pay Band usage and everyone is simply paid by the starting rate. UK civil servant has basically stopped most salary increase for a long time.
Because of that, instead of pay raise a lot of people got promoted which is basically everyone in every department has inflated grades. These promotion are also problematic, again, not based on merit. There are now more SCS1 than ever.
40% of work are irrelevant and made up by seniors to improve their chance of promotion. Another 50% of the work are getting around bureaucracy, only 10% of the work are actually useful.
And there is no way to fix it. Ministers dont want to fix it because they rely on cvil servant to get things done. Civil servant internally lack the interest to reform. And if anything the power of a department is measured by how many staff it has.
But none of these are new. We are now close to 50 years since Yes Minister first aired. And the documentary remains relevant, and everyone should watch it if they want to understand more. And as far as I can tell, this is not UK specific.