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Public sector pay to be cut in poorer areas

George Osborne to end national pay deals in Wednesday's Budget.

Teachers, nurses and other public sector workers in poorer parts of the country face pay cuts of up to 10 per cent.

George Osborne is expected to announce the end of national pay deals in Wednesday's Budget, meaning that workers will be paid in line with local costs of living. The news led both the Guardian and Telegraph newspapers this morning, and was accompanied by reports that the 50p tax rate for those earning over £150,000 a year will be cut to 45p.

The argument in favour of ending national pay deals is that they are unfair to workers in the south-east where housing, transport and goods are more expensive. In Wales, Scotland and Northern Ireland, public sector workers earn 10 per cent more than their private sector counterparts, according to the Institute of Fiscal Studies.

As the Guardian reported:

The chancellor will argue that public sector pay should mimic the private sector and be more reflective of local economies. He intends to start the process in three Whitehall departments in the coming financial year, as part of a phased introduction.

Critics say the move will entrench economic divisions between north and south and depress regions of the country already struggling in the economic downturn.

It has not yet been decided if localised pay will apply only to new staff or to existing staff as well, but it was being stressed that no current employee would suffer a pay cut. Instead pay levels will gradually be adjusted to take account of costs, leading to larger pay rises in the south-east where some labour shortages exist.