People in poorer parts of UK should be paid LESS: Osborne’s plan to end public sector national pay deals
Millions of public sector workers could have their salaries frozen for years
Public sector wages could be brought down by up to 18 per cent over time in poorer parts of the country
It could affect civil servants, nurses, teachers and prison officers
By Jason Groves, Political Correspondent
PUBLISHED: 00:02, 17 March 2012 | UPDATED: 11:25, 17 March 2012
George Osborne will announce plans to freeze pay for public sector workers living in the poorest parts of Britain, in his budget next week.
Millions could have their salaries frozen for years under radical plans to end the system of national pay bargaining.
Critics have said the move will create an even bigger economic divide between the north and south and plunge parts of the country already struggling financially into an even deeper depression.
Mr Osborne yesterday ordered officials to begin dismantling the decades-old national pay system as part of a wider plan to boost Britain’s competitiveness.
In a direct challenge to the unions, he told a dozen departments to immediately start setting pay according to local living costs.
In some poorer parts of the country, public sector wages could be brought down by up to 18 per cent over time.
The initiative starts with civil servants, but will be rolled out to cover the majority of state workers – including nurses, teachers and prison officers.
Some staff could even have their pay cut and starting salaries for recruits will be lower.
Research conducted for the Treasury shows that public sector workers receive an average 8 per cent pay premium, as well as far better pensions.
But the average masks huge variations. In the South East – where living costs are higher – the public sector pay premium is worth just 0.5 per cent, while in Wales it is worth an astonishing 18 per cent. Teachers enjoy the highest pay premium of any profession.
The Chancellor was originally due to launch the scheme in April 2013. But Treasury sources said Mr Osborne was keen to ‘get on with it’ and had ordered officials to bring the process forward by a year.
Negotiations will begin next month in 12 Whitehall departments that have emerged from their two-year pay freeze.
The process covers 160,000, mostly in JobCentres, the UK Border Agency and the Driver and Vehicle Licensing Agency.
The Treasury insists the new pay initiative will be genuinely local, rather than based on crude regional averages. For example, workers in Manchester could be paid different rates from those in Liverpool.
Managers will be asked to examine the wages they pay and compare them to local living costs and private sector wages. Where wages are significantly above the local norm they will be expected to bring them into line.
A Treasury source said: ‘It will be up to departments how they handle it. You can’t rule out pay cuts but given the contractual and political issues that would cause it is probably unlikely.
‘What is more likely is that you would see wages rising at a slower pace or new entrants asked to accept lower pay. The eventual scope is the whole of the public sector, apart from local government workers.’
In expensive areas of the country, such as London and the South East, public sector workers could be offered higher wages to aid recruitment.
Unions are likely to react with fury to the proposals. When the idea was first floated by the Chancellor last year, TUC general secretary Brendan Barber said the plan was a recipe for ‘deep pay cuts in areas of high unemployment’.
Critics say the current system creates distortions between the public and private sectors, with businesses in poorer areas unable to compete for staff.
But supporters of national pay deals claim that decent public sector wages help prop up poorer communities. They warn removing it risks widening the North-South divide.
Eric Ollerenshaw, Tory MP for Lancaster and Fleetwood, warned this week that the issue could deepen the party’s unpopularity in the North.
He said: ‘The emerging issue of possibly introducing regional pay bargaining in the public sector will need to be handled with care.
‘The Government will need to make its case carefully in the face of arguments that such a policy would bring about a brain drain from the North, remove money from the Northern economy and even institutionalise the North-South divide.’
Civil servants have threatened further strikes after rejecting the Government’s deal on public sector pensions. Members of the Public and Commercial Services Union said they backed ‘co-ordinated’ industrial action over plans to increase their pension contributions and switch the way their pensions are calculated.