Eluned Parrott AM writes… Lib Dems should say no to regional pay

At our Autumn Conference, members will be offered a chance to influence the party’s policy on regional and local pay. The Pay Review Body has been asked by George Osborne to look into the possibility of paying public sector workers differing amounts based on where they live. As Liberal Democrats, we must ensure that this policy does not go any further. This is why the Welsh Liberal Democrats, in partnership with the South East Cornwall Liberal Democrats, have tabled a motion designed to send the strongest possible signal that the party does not support any extension of regional or local pay.

This debate is nearly always presented as one of heart versus head – our desire for fairness pitched against cold economic realities. But they are far from mutually exclusive. I believe there are unforeseen consequences of regional pay that could harm our already fragile economy.

It has been argued that the high cost of living in some regions, such as London, means extended regional pay is necessary. But if you artificially inflate wages in expensive places, you’ll consequently create inflationary pressures that push property prices further out of reach for hard working people. If public sector workers can’t afford homes in London, then we should tackle the housing shortage, not penalise workers elsewhere.

Another argument made in favour of regional pay is that the private sector in some regions can’t recruit talent because the public sector pays more. This assumes there’s a latent private sector begging for talent, in Wales that is certainly not true and I imagine that is not the case elsewhere either. Our private sector is struggling to employ people because it doesn’t have the finances to do so, existing wage inequity encourages talented young people to leave the region to follow higher salaries in London and the South East. Cementing this inequity in the public sector will only service to accelerate the ‘brain-drain’ and exacerbate housing shortages in places like London.

Moves towards regional or local pay will only further engrain regional inequalities. Freezing people’s salaries for an extended period until they equalise with local private sector pay rates is completely unfair and would lead to declining living standards. Public sector workers need to see and believe that we value them highly, wherever they choose to work.

One must also consider the politics behind this whole issue. If the Coalition Government decides to go forward and extend regional or local pay, it will be a complete gift to our political opponents. Let’s face it – this policy will be toxic.

This motion will give Liberal Democrats the chance to show that we are the party that the public sector can trust. We mustn’t forget that despite Labour’s current opposition to regional pay, they first introduced regional pay into our courts system. We must be able to say that, in Government, we stopped the further extension of regional pay.

We are calling on Liberal Democrat members to vote in favour of this motion not just because we want to protect those parts of the UK that could be affected by declining income (in real terms) over the next decade, but because we believe that regional pay will harm the economic prospects of the whole of the UK.

* Eluned Parrott is Welsh Lib Dem Shadow Minister for the Economy, Science and Transport and Assembly Member for South Wales Central.

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  • Receiving different salaries for the same job in different parts of the country is a fact of life for the majority of the work force.

    How can it be fair that some public sector workers can enjoy a much higher standard of living based solely on an accident of geography? We can’t build ourselves out of housing market price differentials unless we close our borders to foreign buyers who are probably one of the largest drivers of house price inflation.

    Opposing this will be a massive vote loser for us.

  • Should we oppose regional pay in the private sector? We could pass a law insisting that all national or multi-region firms use common pay scales? We could even insist that all taxis have the same meter charges per mile, wherever you are in the country. Would this be sensible?
    It seems odd to oppose regional pay in the public sector, but not in the private sector.

  • Tim

    You’re looking at it the wrong way round. What you should do is decide whether regional pay is desirable or not a priori. If not, then obviously the government shouldn’t introduce it, but how far the state should go in discouraging it in the private sector is a separate question.

  • Economies work like a complex clockwork machine. Cogs whirr and pistons fire, with every part contributing to the overall product, hopefully a growing GDP. But the machine fails to work as well as it should if some of the parts are not working as well as they could. If each cog represents a nation of the UK, or a region of England, and some of the cogs are made to slow down, then the overall machine will slow down too.

  • How is it fair that a teacher in the South East earns far less in real terms than a teacher in the North? You’re right that it wouldn’t be fair to impose pay freezes on current employees but new starters could be taken on terms that better reflect regional diversity. More broadly I don’t think it is fair on public sector employees or taxpayers to use public sector pay as a tool to achieve other social goals. Pay should reflect local demand for skills just as in the private sector.

  • Keith Browning 13th Sep '12 - 10:24am

    Any attempt to artificially restrict the income of those in the periphery will inevitably add to the honeypot effect of London and the South East. The ‘far distant lands’ need more money not less and if you take away the earning power of public sector employees the economies of those areas will dwindle and we will eventually create our own ‘British desert’ mirroring the ones created by the French in the post war period.

    My experience is that National companies have national pay scales, with employees paid a flat rate across the country, with sometimes a small London weighting that certainly didn’t reflect the increased costs of housing.

    How and where will the boundaries be drawn? Exclude Oxfordshire from the high earning shires and the Tory hierarchy might change their tune.

  • LB – whilst companies may have national pay scales, they also often have wide ranges across those scales which are used to reflect regional variance. And its precisely because there is a reverse honeypot effect currently in operation in the public sector that we need the change. It might also encourage talented individuals who work in the south east and don’t want to relocate to move across into the public sector.

  • Tabman – Local Government scales and points use similar variances. Can’t speak for the NHS.

  • The argument that public sector workers in areas where pay in the private sector is low will somehow enjoy a higher standard of living is superficial . Low pay tends to prevail in rundown areas that are struggling economically and there is not a great choice for employment thereby giving employers the chance to adopt a take it or leave it attitude on pay. The quality of life and the infrastructure in these areas tends to be inferior and people live there only because they were born there and wish to stay close to their roots while talented high flyers move out for a better life dismissing the higher cost of living because is compensated by higher wages. The consequence of regional pay will be that talented public sector workers will not apply for posts that offer second class remuneration in a second class environment

  • “How is it fair that a teacher in the South East earns far less in real terms than a teacher in the North? … Pay should reflect local demand for skills just as in the private sector.”

    But these are two different criteria, aren’t they? I don’t believe that pay levels in the private sector magically achieve identical standards of living throughout the country. If what’s being talked about is really just matching private sector pay, then I don’t think you can press the “fairness” argument.

    And you say “You’re right that it wouldn’t be fair to impose pay freezes on current employees but new starters could be taken on terms that better reflect regional diversity”. Well, in that case the unfairness you complain about would persist for decades. And would it be fair on “new starters” in any case?

  • Keith Browning 13th Sep '12 - 11:31am

    Whichever way you look at it ‘regional pay’ means less money circulating on the edges of Britain. How can that be a good thing, unless you want the rich of the centre to carry on getting richer.

  • Simon, it’s not just ‘except’ local pay is it? There is plenty of things that we don’t believe local authorities should have control of.

  • Laura Gordon 13th Sep '12 - 11:54am

    One reason for opposing this – at least for now – is that the last two governments have been trying to relocate parts of the civil service out of London. Given that many civil servants already have lives in London, basically the only incentive for them to go is the higher standard of living they can enjoy on the same salary elsewhere.

  • “So we are in favour of localism except in setting pay ? Isn’t this a bit of a contradiction?”

    Not unless the proposal is that local people are going to vote on public sector pay levels in their area.

  • Does your motion say that public sector workers in London shouldn’t – unlike now – be paid more? That’s what this article very much seems to say.

    Should schools in deprived areas be able to use the pupil premium to attract teachers who’d otherwise rather go elsewhere?

    Should individual NHS organisations be able to decide they’d rather hire more people but on lower wages, or vice versa?

    Are public sector wages the best way of investing in regions, or would any surplus money be better spent on infrastructure etc. in those regions?

  • Adam, the article is against EXTENDING regional/local pay, rather than stopping it completely. An excerpt of the motion says:

    “Conference calls for:
    1. The UK Government to rule out any further expansion in regional or local pay.
    The continuation of national pay agreements for the Public Sector which may include flexibility to let employers solve specific staff recruitment and retention problems.”

  • Can anyone tell me why London is particularly justified a weighting, while other areas are all uniform?

  • @Mike C:

    Low pay tends to prevail in rundown areas that are struggling economically and there is not a great choice for employment thereby giving employers the chance to adopt a take it or leave it attitude on pay.

    This is not really about low pay and rundown areas but what your pay can buy where you live and work. I live in a reasonably nice area in the East Midlands. My salary is high enough that I can afford to live comfortably, on a quiet road in a detached house. Something that would absolutely not be possible if I moved to the South East. I would struggle to get a 2 bed flat in London even allowing for a probable salary bump of 50 to 70 percent. It makes no sense for me to move to be better off in cash terms but worse off in terms of quality of life. The cost of equal standards of living varies so much across the country and private sector pay reflects that variation. So should public sector pay.

  • “Unless you work in Inner London, Outer London or the Fringe area in which case Eluned wants to scrap your current regional pay …”

    You obviously missed Tom’s comment, pointing out that the motion opposes the extension of regional pay.

  • Peter Watson 13th Sep '12 - 4:23pm

    Setting principles aside for the time being (no laughing at the back), the electoral map suggests that most constituencies with Lib Dem MPs will be adversely affected by the regional pay proposals. Do our MPs really want to return to the voters in their seats throughout the UK in 2015 saying “I know you’re worse off, but if you lived in London you’d be okay.”

  • The cost of living difference between i.e Manchester and Cardiff is so small – it doesn’t make sense to be able to pay people differently. I’m not against London weighting and the motion makes clear this is about not extending equal pay; it is clear the motion wants to retain London weighting, which wouldn’t be affected by the government’s proposals anyway. Adding additional layers of pay inequality is unfair. Taking money out of the regions also isn’t good – public servants having money to spend boosts the local economy and results in a stronger economy in the local area, and contributes to boosting the UK tax take nationally and therefore reducing the deficit.

    It is also important to remember that there is a strong correlation between poorer regions of the UK and those that have a higher proportion of jobs in the public sector, so these areas will be hit doubly hard.

  • Regional pay : What a terrific idea. How come, when times get tough, we always want ‘someone else’ to endure austerity.
    The Germans want southern Europe to take the hit of austerity, and the ‘Economic Gated Community’ of London and the South East, want ‘them up north’ to take the hit of austerity. (sorry,.. lower regional pay).
    Once you’ve got them damn northerners back down to 3/6 pence per hour, how about regional benefits, regional state pensions, regional healthcare, regional education.
    Or maybe we could try to adopt policies that curtail the overheating of the SouthEast and recognise that there is a world beyond Watford.
    Will anything ever change, or is parochial selfishness hard wired into LD thinking?

  • Tony Greaves 13th Sep '12 - 9:08pm

    Good stuff, Eluned. I am appalled by most of the comments to your piece (though of course many of them may not come from Liberal Democrats).

    But it has certainly brought out two undesirable tendencies – people who think that the economic inequalities between London/South-east England and the rest of Britain should be increased (I know that the coalition government has been and is increasing them as a consequence of many of its policies), And the right-wing “neoliberals” who think that the market should rule everything.

    Those of us in areas of England which are really struggling now would find it impossible to defend a policy in which public sector workers here as a general policy get paid less than in London and the South East. And we would rightly be slaughtered for it electorally.

    Tony Greaves

  • Simon

    Considering you yourself misunderstood Eluned’s position earlier, because you hadn’t bothered to read the information that had been posted here, perhaps a little more humility would be in order – even if you can’t bring yourself to admit you got it wrong in the first place.

  • Good article. Shame about most of the comments.

  • To those complaining about the comments – why don’t you address the points made? It may seem obvious to you that standard of living is less important than absolute cash amounts but it is not so obvious to others!

  • A paper has been submitted to most pay bodies signed by the bulk of Lib Dem backbench MPs arguing against Regional Pay. The suggestion made above that lowering pay relatively in ‘the regions’ will enable more public sector jobs to be created and thus more money circulate in those areas of higher unemployment misses the point that the government has actually no intention of creating more public sector jobs. The bottom line is that a good employer (aka the state ) needs a good reason to ask people to work at different rates of pay and there is not a compelling reason

  • John Pugh, tosay that there is no compelling reason to pay different rates for the same job is nonsense. Publisector workers cannot afford to work in London and the south east so there is a shortage. Unless the pay range can be extended we will end up in crisis.

  • The pay structure we have now does not lead to equality of opportunity for pupils. The education system is for pupils, not for teachers and other staff. Does anyone care about the children?

  • Alastair – hear hear. And thank you for referring to “pupils” rather than “students”.

  • Janet Ellard 21st Sep '12 - 3:20pm

    What happened to equal pay for equal work? Having large variations in pay for people doing exactly the same job = inequality.

    People in favour of regional pay are probably looking for greater fairness, but the logistics of deciding who should be paid more and exactly what they should be paid will be a nightmare and will just result in greater unfairness. I have spent much of my working life in education. How on earth would regional pay work in education? I happen to live right on the border between England and Wales. If I worked in England, would I be paid less or more? If I worked in Wales, would I be paid less or more? Would teachers in the same school be paid different amounts, according to where they lived, so that anyone commuting to work from an area where the cost of living is lower would be paid less? I can’t see how it could possibly work and so many employees would feel that they had been treated unfairly.

    In education, it would probably be the more challenging schools that would like to pay more, to attract staff. If this were permitted, teachers living in the same city, with the same cost of living, would be paid more in some schools than others. More unfairness. The current system is imperfect, but basically fairer than introducing regional pay in education. I know far less about other public sector workers, but tend to think that similar arguments could also apply in these areas.

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