The Welsh Liberal Democrats believe that regional pay would further entrench Wales as a low-pay economy, both in the public and private sectors. More to the point it would lead to men and women doing the same job at different ends of the country, but receiving different rates of pay. I believe in the principle of an individual being paid a rate for a job, not in a multi-tier system which sees wages set on a postcode-by-postcode basis which will ultimately see the rich areas of south-east England become richer at the expense of the rest of the UK and in particular Wales.
Freezing people’s salaries for an extended period until they equalise with local private sector pay rates is demonstrably unfair and would lead to declining living standards and the further economic depression of many communities in Wales.
While housing costs in Wales are on average less than those in some areas of England, gas, electric and fuel bills are often much higher. Food costs are the same, or as is the case for many rural parts of Wales – much higher. Any move to reduce or freeze public sector wages based on differences between private and public sector salaries will merely serve to further ingrain deprivation as a fact of life for many Welsh communities.
Welsh Liberal Democrats do not believe that regional pay will stimulate the local economy, and instead urge the Welsh Government, the WLGA and UK Government to work closer together on appropriate private enterprise stimulus packages. The best way to tackle an 18% salary difference between private and public sector workers in Wales is to raise up earnings in the private sector through the development of high value, high quality jobs.
It is important we do not forget that it was under Labour that regional pay was first introduced in to the courts system. We opposed that move then and we oppose the current suggestion made by Chancellor George Osborne that a similar system could be rolled out across other civil service departments.
Like many of our colleagues in Westminster, Welsh Liberal Democrats are fundamentally opposed to regional pay.
* Peter Black is a Liberal Democrat Councillor in Swansea and was a member of the then Welsh Assembly for the South West Wales region between 1999 and 2016.
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30 Comments
I’m not convinced that one can logically argue for devolution of power but not devolution of pay. If it is truly more expensive to live in rural wales, then presumably the writer believes that wages will be set to reflect that. Otherwise, one might assume that other factors – like quality of life mean people accept lower wages as a price worth paying.
It’s not a clear cut issue, many commentators accept that private firms and public sector bodies like councils effectively operate localised pay by use of bonuses, perks and incentives
There is an absense of figures (lack of space no doubt) to back the assertions made in the article. Housing in parts of Wales is abouyt three times cheaper than where I live. I would argue that a teacher in Wales compared to a teacher in Surrey gets a better quality of life and more spending power ! There is an argument that national payscales help reduce pressure on the south east by making the lower housing costs parts of the UK more attractive. That might be a reason to keep them, but that is hardly a fundamental reason to oppose lcola pay scales.
The issue is that regional pay will entrench Wales as a low pay economy. Housing may be cheaper in Wales than London but energy prices are higher, transport issues associated with such a rural economy also add costs. Wales has one the lowest GDPs of any part of the UK and we need to grow out of that. Reducing public sector pay by 18% will further depress the economy here and undermine efforts to tackle that problem. Basically though the principle has to be that each public sector job has a rate which should be universal across the UK. Once you start undermining national pay bargaining then regions compete with each other for workers with the outcome being further overheating of the South East of England.
Good article Peter, am glad the Welsh Liberal Democrats are making a stand on this.
Except that if Welsh councils could set pay locally, wouldn’t they then able to encourage people and businesses to move there? If it’s hard to recruit, increase pay. Conversely, if it’s a choice between losing my job and reducing my pay, I’d like you to reduce my pay.
Also, surely “the principle of an individual being paid a rate for a job” *completely* neglects those differing local costs you mentioned, such as housing and utility bills?
If you pay the same to teachers and nurses in Harlech as paid in Hackney, teachers and nurses in Hackney will find it hard to scrape a living; while tax receipts in Harlech will struggle to cover the wage bill and private sector employees in Harlech will be priced out of homes.
It’s worth noting Vince Cable’s comment on Question Time last week:
“Imposing regional variation in pay would be completely wrong and it would not work”
“We certainly don’t want to be in the situation where in relatively low paid areas of the country we depress pay that would not be fair.”
So there are clearly some people in England, London and in the Cabinet table to take a view that takes on board the inetrests of all parts of the UK
Welsh Councils could not afford to set pay rates at a level to compete with the South East of England. The reality of regional pay is that it will lower wage rates for teachers and other public sector workers in Wales and send them looking for jobs elsewhere. Welsh Councils will not be able to fill vacancies or else they will find their choice of employees limited to those who cannot get jobs elsewhere. The result will be worse public services here.
The rate for the job is precisely that, it is not related to individual and local economic factors. London already has weighting to compensate for higher living costs. That is different to regional pay as it is a supplement rather than a differentiation. I am happy to continue to support that but NOT an extension that will leave Welsh workers worse off.
Am very worried about this potential change – the Lib Dems can not let this happend.
Also, let’s not forget that Labour support regional benefits.
@Peter
Thanks for engaging. 🙂
“Welsh Councils could not afford to set pay rates at a level to compete with the South East of England.” Yes, I think that’s what I was suggesting might well be the problem with national pay rates. So you want the rest of the country to subsidise Welsh public sector wage bills? That seems fair enough to me, but how is that an argument against locally decided pay? (genuine question)
I’m not sure I agree that lower wage rates are a necessary consequence of locally decided pay in every type of job. If you’re having trouble recruiting science teachers, say, they might get paid more. In fact this kind of thing already happens, just that it ignores huge local variations. There’s an ample supply of music teachers in Devon, but I bet there isn’t in Hull.
Nor do I agree that lower wages automatically means an exodus in every category of public sector employment. I wouldn’t be the only one to be happy to apply for a job in Wales that has lower pay than similar work in London, so long as my buying power was much the same. I would value the quality of life in Wales as very much higher.
Wales is subsidised anyway as, with any competent and fair regional economic policy, you use resources to try and lift up deprived areas and tackle fundamental differences in levels of health and education, That is what the state is for. A national pay rate though would not subsidise Wales it would ensure that (with the exception of supplements like the London allowance) people get paid the same rate for doing the same job whereever they work within England and Wales.
The experience of the court service, where the previous Labour Government introduced regional pay, is that such a policy does lead to lower wage rates in low wage economies such as Wales.
The shortage of teachers etc is not in Wales but in the richer areas such as the South East of England. The likelihood therefore is that any regional pay policy will mean higher rates of pay there, which will draw good people away from areas like Wales. Yes, quality of life is important, as is lower housing prices but that appears only to work for those seeking to retire here at present. We cannot base our economy on that.
Caractacus
>I would argue that a teacher in Wales compared to a teacher in Surrey gets a better quality of life
Big chunks of South Wales qualify for EU deprivation grants. Plenty of ‘problem’ schools as well as nice rural ones.
Take Merthyr: 20% of children live in workless households, 13.7% of working age adults are unemployed (Children and Young People’s Plan 2011-14),
You need more than the scenery of the nearby Beacons, I suspect, to attract teachers there.
Reason public sector jobs need to be subsidised is that the public sector accounts for 25.6% of employment in Wales (3rd 1/4 2011), against 20.6& UK average, and private sector pay is low. We don’t have the revenue from private sector workers to fully fund the public ones.
Not sure driving public sector pay down would help the rest of us though: traders etc already suffering from fewer customers as public sector jobs axed.
We can’t let this happen, why can’t the coalition just leave well alone? If the Tories want to do it, then fine… but it’s not in the Coalition Agreement so they can do it if/when they form a majority government. Lib Dems should not let this happen, times are hard enough at the moment as it is.
I hope Vince stops any plans for this.
@Lon Won
It might look as if Welsh councils could set pay locally, they then might be able to encourage people and businesses to move there.
However, the likely practical effects would be different as Peter points out. To give a very specific pair of examples, if you have pay set by either GO region (very crude, and an astonishingly bad idea, especially for Wales) or by local authority (merely a very bad idea), then skilled Welsh workers in some border regions – Wrexham, or Cardiff to pick two excellent examples, would find they would have the choice of jobs in Wales, or jobs they could just as easily commute to without even moving house in better-paying English regions that would pay more (Cheshire West or Bristol/Bath) for exactly the same job.
The issue is not ‘Welsh teachers will go to work in London and get paid more’, it’s ‘Welsh teachers can go to work in Bristol and get paid more and they won’t even have to move far or pay those higher London rents’.
And there is no incentive at all for Bristol teachers to go the opposite direction because there is literally nothing in it for them. Unless they’re the ones who can’t compete with the good Welsh teachers and so can’t get jobs in Bristol.
“Welsh Councils could not afford to set pay rates at a level to compete with the South East of England. ”
That depends on the way that money is dished out. My preference is for all areas to get money for schools based on the number of kids, and the poverty of the area. So Wales would get more money, and people in Surrey would pay higher council taxes to cover the difference. At that point a Welsh council CAN afford to pay the same rates as the South East, but they would not be FORCED to do so. Democratically elected councils in Wales COULD decide to pay less, and hire more teachers, raising school standards, or they COULD decide to pay teachers less and improve other services or they COULD decide to pay teachers less and cut council tax or they COULD decide to just do whatever the South East decides to do.
Peter: What is wrong with giving them those choices?
Local Pay has the chance to give regions a real boost. But only if done with real sensitivity and consideration for local factors. Otherwise it could easily cause more harm than good.
You need to take into account various different issues.
1st that for jobs occupied by mobile professionals such as doctors or teachers, where job competition is with other doctor, teacher jobs, that wages should be higher in more deprived areas, to encourage doctors and teachers and other professionals to take on the more difficult jobs. That could actually boost spending power in more deprived regions. But would presumably require extra funding, or some way of making sure pay was set sensibly and not just as part of a bidding war.
2nd that for general jobs where competition is with private sector roles in the same area such as admin, clerical, etc then the idea that pay should perhaps be lower in cheaper areas, or at least more closely match private sector pay, in order to avoid crowding the best employees out of the private sector, by charging wages they just can’t compete with. This would cut spending power in such regions, a bad point. Also it’s fair to say that it would only be one part of boosting the private sector in such regions, and certainly wouldn’t work on its own. Serious investment to overcome the other myriad problems would also be needed.
3rdly is the fact that in some areas although private sector pay may be lower than average, costs may not be, so this is a 3rd variable that must be taken into account. If we’re going to look at real wages we need to look at real wages relative to local price levels as well. And take this into account.
Only if all 3 parts are considered together could local pay setting have a strong positive contribution. What would opponents say if it was guaranteed that regions would not lose money over-all, but that some jobs would see pay rise, some would see pay fall, and that any net over-all cut in wage costs would be funnelled back into regions in the form of fixed economic investment spending, or general public service funding? That would ensure that areas didn’t lose spending power, just that it was shifted around in a manner that would hopefully be more economically efficient and helpful to encouraging long term (especially private sector) recovery?
@Tim
With all due respect, your idea is not what is under discussion, is it?
And once you start to allow local councils to set different rates for, eg, teachers, you set up a genuine labour market. In your scenario, the local authority doesn’t ‘improve standards’ by lowering teacher’s pay. It loses their teachers to the LA down the road that pays the good ones a bit more.
The logical outcome of the free-for-all is that the lowest payers end up with skills shortages.
@Tim Thanks. I was struggling to put that point clearly.
@Peter Given this, why should locally decided pay mean reducing public sector pay by 18% and entrenching Wales as a low pay economy?
Perhaps, as in Chris Riley’s example, if there are many vacancies for a particular type of job, councils in Wrexham or Cardiff would want to maintain similar pay rates to Cheshire or Bristol. Or maybe, as in Cassie’s example, Merthyr would want to pay more, to attract the best, in line with Stephen W’s issue 1? Or pay less and hire more, as in Tim’s example?
And it seems cruel to ask this, but might there be some jobs for which the national pay rate is far in excess of what is necessary to attract good applicants? Refusing Welsh councils the power to decide pay would also then be potentially reducing the numbers that they can employ, and the money available for (say) stimulating jobs and growth in green energy or in the creative economy.
Giving councils more control over pay was one aspect of a liberal proposal I made a couple of days ago on my blog.
I have to say, though, I agree wholeheartedly with Stephen W’s point that it would have to be “done with real sensitivity and consideration for local factors. Otherwise it could easily cause more harm than good.”
Chris – I don’t think we know whether my suggestion is under consideration, but if there is a way to make local pay work (as I suggest there is), then surely as liberals we should be interested in it? I doubt a Welsh LA would lose lots of teachers to Surrey if it raises wages by half as much over the next few years. A Welsh teacher certainly wouldn’t be better off by moving to Surrey in those circumstances. Note that I am not saying that the Welsh council SHOULD do this, simply that it should have the RIGHT to do this, in the context of proper funding. That’s localism, surely?
Tim/Lon, I love your theories but real life is different to that. We are struggling to get teh Treasury to make small changes to the Barnett formula, they will not even countenance anything that smacks of the distribution of money around the nations and regions on the basis of need. And that is with a Liberal Democrat Chief Secretary to the Treasury in post. You have seen the uproar in England at the thought that they are subsidising free presecipions etc in Wales. If you asked them to pay more tax so Welsh Councils could pay higher wages than they can secure in their own area there would be riots. Your mechanism is fantasy land economics. The reality remains that regional pay will drive down wages in Wales, as already happens in the Court service and entrench us in a low-pay economy. The politics of this are even worse. Perhaps you should get out of your academic tower and knock some doors in the South Wales valleys.
@Tim
I do agree that regional pay could play a role in addressing some labour market disparities if applied benignly and if your role allows you to influence discussion along those lines, then more power to you.
As I mentioned in my other post, I’m not so concerned about a Welsh LA losing teachers to Surrey. I’m concerned about an internal labour market developing for teachers that will see the poorest areas losing out and I think local pay scale discussions have to be considered very carefully when we’re looking at a finite pool of skills that may not be very easily increased on a local level. There are ways around that – the most obvious is to allow non-qualified staff to teach – but many of them are unsatisfactory and could lead to other issues developing.
Peter – All I am saying is that Wales (etc) should get the money it gets now, no more and no less, but have the right to spend it as it wishes. I don’t see why any liberal would oppose that.
@Peter Black AM
“More to the point it would lead to men and women doing the same job at different ends of the country, but receiving different rates of pay.”
That’s a good argument against London weightings. Are people arguing against London weightings, and if not, why not?
This is purely about the Coalition trying to save money, it’s not about localism or liberalism or any such things.
In a nutshell, people in poorer parts of the country will be getting paid less. Great.
@Simon Shaw
It’s a very good argument against London weightings, but, that argument, like most, has two sides, and the side for London weightings has even better arguments – and more of them. Which is why we have them.
@Chris Riley
Like you and I guess most people, I support having London weightings.
My point is that if you agree with them, then you agree with the principle of “men and women doing the same job at different ends of the country, but receiving different rates of pay,” which Peter Black purports to be against.
If one agrees with London weighting, then how can one logically be against regional pay in Wales (or anywhere else) in principle?
Because a London weighting is not a regional variant in pay, it is a supplement to compensate for extraordinary financial circumstances. A proper regional structure will also see real term reductions in pay in other regions and that is the problem.
Tim, any Liberal worth his/her salt would oppose Wales getting what it gets now, no more no less. That is because it is not based on need and Wales is underfunded. It also is not accountable for its income as the Welsh Government does not have tax varying powers.
Well done Peter, I totally support your stance. I wish our party nationally would have the same good Liberal priniciples.
@Peter Black AM
“Because a London weighting is not a regional variant in pay, it is a supplement to compensate for extraordinary financial circumstances.”
I’m sorry, but how is a “supplement to compensate for extraordinary financial circumstances” not a regional variant in pay?
There is a difference between local or regional pay, where public sector remuneration is set according to level of private sector pay in an are and a supplement introduced to meet a specific circumstance. Some Councils for example pay supplements over and above the national rate to attract social workers. A supplement will always be additional, regional or local pay can often be negative.
People always say that Wales is subsidised by England. That assumes that all the taxes my family paid while living in exile because of a shortage of jobs in Wales were for the exclusive use of England. Personally I would have preferred my English taxes to be spent in Wales so that I could have come home BEFORE taking early retirement.
On another point, no one considers what happens on the borders of high and low paid areas. For 25 years I was on the wrong side of the London Weighting boundary. The London Weighting allowance paid to Bankers, Senior Civil Servants and Chemical Company employees etc vastly inflated the house prices in the town where I lived. But as an employee of a Research Council (which did not pay London Weighting that far out) with an “on call” job I had to pay these prices. The Nimbyism of the commuters meant that my town with 32,000 population had only “village” facilities and we had to travel to other towns for almost everything.
One also has to remember what the ultimat affect of paying London Weighting has been. FOr many people in the middle of London, who have been drawn in by the promise of higher pay, “company restructuring” in bad times has left them without an income in a very expensive place. Regional pay will spread this hardship to all the high pay cities.
I now run a small business in West Wales. On our farm and nature reserve we run a small campsite and decorate china and sell craft items. We are kept afloat by the very people who would be hit by regional pay. This area is famous for its artists and crafts people, and they provide the indoor entertainment for tourists when the weather is less then perfect. Without these small businesses the Tourist industry would fade away.
For a high proportion of businesses in Wales (including for example Artists, Crafts People, Guest Houses and Static caravan maintenance businesses, village shops, farriers, etc) the cost of employing people is not a problem. The sparse population means that businesses have to remain small to survive. Many are what the Government calls “micro businesses”, and only employ people on a casual basis. (Reducing wage bills would make no difference, as there would be no productive work for them to do once the tourists went home for the winter.) However the micro businesses provide valued services to rural communities and provide work for other businesses. Things might be different in the major connurbations, but if city dwellers enjoy visiting the country on their days off, they have to remember who their hosts are.
City people talk about the higher standard of living in the country. However we pay a price for that. If you run a micro business you find that for much of the year you work 100 hours a week, and miss out on much of the “standard of living” that city peopl get when they visit you rvillage when on holiday. Yes, its beautiful, we have a lovely community and I love being here, but just because the grass appears greener, does not mean that it is actually quite as green as you imagine! And I keep lsong track of this message because my “up to 8Mb/s Broadband” is only getting about 97Kb/s and that results in very strange Browser behaviour indeed!