Regionalised pay: A dangerous distraction for our regional economies
Today I am taking part in a Policy Exchange roundtable on the future of national pay bargaining in the public sector. With our economy in a double dip recession, and the deficit increasing by a quarter so far this year, it’s clear that as well as urgent action to kickstart growth, over the coming years we will need radical reforms to rebalance and rebuild our economy, and a relentless focus on getting maximum value for every penny of public spending.
But I am not persuaded that regionalising or localising public sector pay is the answer to the problems that we face – on the contrary, it would be most likely to make them worse.
The government has suggested that making public sector pay more “market-facing” would help support the recovery and regeneration of regions outside London and the South East. But allegations of excessive public sector “premia” are based on highly contestable statistical analyses – the public and private sector workforce are made up of very different people doing very different things, and many public service occupations simply have no meaningful private sector “comparator”.
And there is no evidence to support the claim that the reason private businesses are struggling in many parts of the country is that public service workers are being paid too much. The real problem facing private sector employers in places like my own constituency in Leeds West is the double-dip recession that, according to the latest report from the ippr, “has hit the North hard, with unemployment rising and business confidence falling”.
Indeed, as the paper published by Policy Exchange today acknowledges, shifting resources out of “low cost areas” wouldn’t help “problems of recruitment in deprived areas”, and would “be likely to damage growth and exacerbate regional inequalities.”
But the model they propose – insisting that schools, hospitals and other public sector employers plan and negotiate their own pay settlements at local level – is equally problematic. They suggest that, left to go it alone, headteachers or hospital managers would be able to solve any problems of staff recruitment, retention or motivation. But this will make it harder to plan and control costs, as public service providers compete with each other for scarce skilled staff.
Meanwhile those most likely to lose out will be less mobile workers on lower grades, many of whom will be women. Indeed, the NHS Employers’ own submission to the current government consultation raised concerns that breaking up national pay systems could jeopardise progress made in delivering equal pay for women working in the NHS under Agenda for Change.
The fact is that many public sector employers – including most local authorities – who could opt out of national pay structures if they wanted to, choose instead to focus their energies and resources on the challenges of improving the services they deliver. That’s because the costs and complexity would be immense – diverting scarce resources into extra layers of administration and bureaucracy, and adding to uncertainty and the risks of industrial disputes.
At a time when government, employers and public service workers need to be working together to find a way through one of the most challenging periods ever for our public sector, this kind of distraction and disruption is the last thing we need. This is why I remain opposed to any moves to dismantle national bargaining arrangements that offer the best means of planning public sector pay in a way that is fair, efficient, and in the best interests of taxpayers and public service users.