No convincing case for Osborne's regional pay plan

Tuesday 19 June 2012

The argument in favour of regional pay only makes sense if viewed through the prism of the south-east of England.

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The Chancellor George Osborne was attracted by the idea of pegging civil service pay rates to those in the private sector in the same area as a means of reducing the overall cost of public sector pay.

In the March Budget he announced public-sector pay review bodies would examine the scope for local agreements, arguing that national pay bargaining drove up local wage rates in the private sector. Around 30,000 people in Scotland are employed in UK Government departments. According to Treasury calculations, the public sector premium for women in Scotland is 19% and the overall differential in the Strathclyde area is 17%. This is a significant advantage. However, the chief argument for reducing these rates is that they push up private sector pay to uneconomic levels. If that were the case, most people would expect the gap between the two to be much narrower. Mr Osborne's proposal to replace national pay bargaining with local agreements would reduce pay levels outside London and the south-east of England. Yet many pay scales in the public sector include a London weighting intended to compensate the job holder for the additional cost of living in the capital. While this may be fair recompense for the higher housing and transport costs of living in London, the allowance for public employees amounts to a premium, the consequence of which will be to increase wages in the private sector, the very problem the Chancellor is trying to eradicate elsewhere. Last year the Government spent around £116 million on London weighting. While some Government posts are required to be in London, this figure suggests there is considerable scope for making savings by dispersing more jobs throughout the country. This would have the additional benefits of boosting the economy in less prosperous areas and easing the pressure on housing, water and public services in the London area. As we report today, Nick Clegg appears poised to veto the idea, with the Prime Minister's office suggesting a convincing case has not yet been made. This is the right move by the Deputy Prime Minister but it is overdue. Mr Clegg may have been lobbying behind the scenes but his tardy intervention appears to owe more to the disastrous electoral consequences for the Liberal Democrats of supporting a substantial wage cut for public servants in less prosperous parts than a principled desire to halt an unfair and damaging policy.

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No convincing case for Osborne's regional pay plan

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