Fury at call for freeze on public sector pay

Political Editor

Tuesday 4 September 2012

SCOTLAND'S public sector workers should face a permanent pay freeze to bring them into line with counterparts in the private sector, a think-tank claims in a report published today.

PROTEST: Unions oppose cuts to public sector pay

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Magnus Gardham Political Editor

Ending annual pay rises and automatic upgrades based on an employee's length of service would help eliminate the £1.2 billion "overpaid" to public sector workers north of the Border, claims the free-market Policy Exchange.

It blames national pay agreements for opening a 14% gap between pay and pension deals enjoyed by public sector staff and those doing equivalent jobs for private companies.

It also urges the UK Government to press ahead with plans to end national pay bargaining, a move that is being fiercely resisted by the trade unions.Dave Watson, Unison Scotland's head of bargaining and campaigns, described the document, Local Pay, Local Growth, as "regurgitated dross".Policy Exchange, often described as Prime Minister David Cameron's favourite think-tank, said "rebalancing" public sector pay and pensions to bring them into line with private sector remuneration would save £6.3bn across the UK, including £1.2bn in Scotland.It claimed the savings, which would be ring-fenced and used locally, could create 37,000 private sector jobs north of the Border.The report recommends "a permanent freeze on annual pay scale uplifts and the abolition of automatic pay progression points" – ruling out basic wage increases or the increments awarded to many public sector staff as they gain experience in their job.Instead, it adds: "Pay increases for public sector employees across the country should then be based on a system of performance- related pay – with total increases in each area tailored to reduce the existing pay differential between public and private sector employees."Policy Exchange claimed on average public sector workers are 14% better off than counterparts in the private sector, taking pensions into account.It said in parts of the UK where private sector wages are traditionally low, the difference rises to 25%.The report says the total UK-wide "overpayment" to public sector workers, compared with private sector rates, was £6.3bn, enough to create 288,000 jobs.Scotland was second only to Wales in terms of potential savings, according to a league table of 20 UK nations and regions outlined in the report. It said £1.25bn could be saved in Wales.It blamed national pay bands for creating a growing "public sector premium" which was damaging to the economy "since it wastes valuable public money that could be used to boost growth and cut unemployment in areas being hit hardest by the recession".Co-author Matthew Oakley said: "The current system of national pay bargaining is bad for the economy and bad for public services. "Our proposals would mean that not a single penny would leave poorer regions. "All the money would be ploughed back into reducing unemployment and boosting growth in the poorest parts of the country."The report raises the prospect of public sector workers across most of the UK facing swingeing cuts to their pay and pensions.However, those in three areas where wages are relatively high – inner London, outer London and the south-east – would be entitled to pay increases as they lag behind private sector counterparts.Despite criticism from LibDem Business Secretary Vince Cable, Chancellor George Osborne has already told Government departments they can move to local pay deals when existing pay freezes come to an end, starting next year.Latest figures show 584,800 Scots, or 23.8% of the workforce, are employed by the state Pay rates in the NHS, Scotland's biggest single employer with more than 130,000 staff, are agreed by the Scottish Government, but usually in line with UK pay review bodies.Council workers' pay is negotiated between unions and local government umbrella body Cosla. Police and fire service pay is negotiated with the Scottish Government but, as with the health service, settlements have remained in line with the rest of the UK. Civil service and military pay is set UK-wide.Meanwhile, Mr Watson said: "The arguments against regional pay are strong and backed by hard evidence. On top of the costs to the economy as people spend less, it would also hit services, with pay cuts leading to shortages of key staff and increased staff turnover."Gregg McClymont, Scottish Labour's pensions spokesman, said it seemed bizarre in these difficult times that "there remain those who wish to further cut the wages of hard-working Scots".A Scottish Government spokeswoman said: "The Scottish Government has made clear it opposes proposals for regionalised pay."

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Fury at call for freeze on public sector pay

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