Regional pay in the public sector

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Jonathan Edwards MP warns that the dispute over public sector pensions is far from solved, with the next battle for public sector workers already looming – regional pay.

Despite the claims of the Con-Dem government, who have cast the public sector in the role of the bogeyman for the UK’s debt problems, life isn’t easy for public sector workers.

The Office for Budget Responsibility estimate that, between 2011 and 2017, there will be 710,000 fewer civil servants in the UK, there has already been a freeze for public sector workers earning over £21,000 in the past two years and pay rises limited to an average of 1 per cent for the next two years – real terms cuts - and their pockets are soon to be picked to pay for public sector pensions – despite there being no obvious need to do so.

In that context, and with a timetable which suggests a man in a hurry, the omens for regional pay in the civil service are not good.

In the Autumn Statement, the chancellor George Osbourne, announced that he would be asking pay review bodies to consider how public sector pay can be made more responsive to local labour markets, with a request to report back by July 2012 so that this could be introduced as early as the 2013-14 pay round.

Given what has happened in the public sector since May 2010, there are very few people willing to put an optimistic spin on the outcome.

At best, one can imagine a revenue-neutral outcome in which those whose occupations are based in more expensive locations are recompensed more closely to their outgoings, geographically pitting some parts of the public sector against each other.

At worst, this is another attack on public sector workers with the aim of saving money here, there and everywhere through cutting wages in most parts of the UK – a cash-grab not dis-similar to that taking place over public sector pensions.

But the debate is more ideological than even that of the UK’s finances.

After making the announcement in the Autumn Statement, the chancellor explained that this would be a significant step towards the creation of a more balanced economy in the regions of our country which does not squeeze out the private sector.

I am fully in favour of a more balanced economy, but I suspect that the chancellor's idea of a balanced economy might be different from my own.

In Wales, there is undoubtedly too small a private sector. Sometimes this is mis-represented as being too large a public sector, but that is not the case.

The private sector in Wales needs to be given encouragement to grow – through tax breaks, government support for specific industries, infrastructure improvements.

Sharp cuts in the pay available to public sector workers would have a hugely negative impact upon their ability to spend in the private sector and probably lead to a vicious downward spiral with job losses in the private sector and then a further downward impact upon public sector pay to again re-align.

The effect of regional pay may well be to institutionalise lower pay and create employment ghettos.

My concern is that, despite these potential problems, the twin siren call of saving money and dismantling the public sector may be too much for the chancellor to ignore.

Jonathan Edwards has been Plaid Cymru MP for Carmarthen East and Dinefwr, Wales since 2010