Four questions Osborne must answer before introducing regional pay

Why has the Chancellor jumped the gun of an independent review?

Why has the Chancellor jumped the gun of an independent review?

The budget leak about introducing more localised pay-setting for civil servants in a number of government departments is not a great surprise. The Treasury has been toying with regional pay issues since the IFS reported that earnings are 10 per cent higher for men and 15 per cent for women in the public sector in Wales, Scotland and Northern Ireland.

What is surprising is that such an announcement should pre-empt the findings of the Independent Pay Review Bodies' review, commissioned by Mr Osborne, which is due in July. If the Chancellor is to jump the gun in this way then he needs to address four big questions.

1) Is there evidence that public sector pay rates have a direct effect on private sector wages and job creation in regional economies?

While few dispute evidence of a pay gap, changing the current system would appear to be based upon the principal assertion that high public sector pay rates in weaker local economies are making it difficult for private sector companies to recruit staff. It is not difficult to find disgruntled employers who are prepared to endorse this line of thinking but policy by anecdote is a dangerous business and there is no substantive evidence that this is the case.

What limited evidence there is on the impact of public-private pay gaps - an LSE report on the impact of pay differentials on hospital performance - highlights pay effects on depressing performance in high wage areas, but this is an altogether different argument.

2) Will the pay gap will close without further government intervention?

In his first budget as Chancellor, George Osborne announced a public sector pay freeze which he has subsequently extended to last over three years. In preliminary analysis carried out by IPPR North, this in itself would appear to be sufficient to close the gap by 2015. If the government needs to embolden its approach then it must provide evidence that additional measures are needed above and beyond the pay freeze already announced.

3) Has the Chancellor screened out a raft of unintended consequences?

Perhaps the greatest concern about reducing public sector pay is the risk of depressing weaker economies still further. The government's argument that public sector jobs were crowding out the private sector is looking increasingly flawed as Northern economies experience a double dip jobs recession and unemployment touches 10 per cent across the North.

In fact, public sector cuts have hit the public and the private economy hard and what is needed is stimulus not further constraint. Furthermore, squeezing pay risks a race to the bottom which ultimately undermines productivity and reduces the competitivity of Northern economies exacerbating the North-South divide.

4) If localising pay is such a good idea, then why are private companies doing the reverse?

In one of the more interesting interventions on this debate, the Incomes Data Services have produced a report looking at the use of regional and local pay by the private sector. They find that the only real regional pay variations that exist are between London and the South East and the rest of the country.

Furthermore, aside from housing costs in the Greater South East, the cost of living across the country is converging. For this reason, most large national and multi-national private sector companies are moving away from complex regional, zonal and local pay structures which breed resentment and reduce productivity, in favour of simpler systems which top-up London pay.

If the Chancellor is serious about stimulating growth in less prosperous places then perhaps he should look to grow investment and productivity outside London rather than precipitate a race to the bottom in places that are poor enough already.

Ed Cox is Director of IPPR North

Ed Cox is Director at IPPR North. He tweets @edcox_ippr.

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Who will win in Copeland? The Labour heartland hangs in the balance

The knife-edge by-election could end 82 years of Labour rule on the West Cumbrian coast.

Fine, relentless drizzle shrouds Whitehaven, a harbour town exposed on the outer edge of Copeland, West Cumbria. It is the most populous part of the coastal north-western constituency, which takes in everything from this old fishing port to Sellafield nuclear power station to England’s tallest mountain Scafell Pike. Sprawling and remote, it protrudes from the heart of the Lake District out into the Irish Sea.

Billy, a 72-year-old Whitehaven resident, is out for a morning walk along the marina with two friends, his woolly-hatted head held high against the whipping rain. He worked down the pit at the Haig Colliery for 27 years until it closed, and now works at Sellafield on contract, where he’s been since the age of 42.

“Whatever happens, a change has got to happen,” he says, hands stuffed into the pockets of his thick fleece. “If I do vote, the Bootle lass talks well for the Tories. They’re the favourites. If me mam heard me saying this now, she’d have battered us!” he laughs. “We were a big Labour family. But their vote has gone. Jeremy Corbyn – what is he?”

The Conservatives have their sights on traditional Labour voters like Billy, who have been returning Labour MPs for 82 years, to make the first government gain in a by-election since 1982.

Copeland has become increasingly marginal, held with just 2,564 votes by former frontbencher Jamie Reed, who resigned from Parliament last December to take a job at the nuclear plant. He triggered a by-election now regarded by all sides as too close to call. “I wouldn’t put a penny on it,” is how one local activist sums up the mood.

There are 10,000 people employed at the Sellafield site, and 21,000 jobs are promised for nearby Moorside – a project to build Europe’s largest nuclear power station now thrown into doubt, with Japanese company Toshiba likely to pull out.

Tories believe Jeremy Corbyn’s stance on nuclear power (he limply conceded it could be part of the “energy mix” recently, but his long prevarication betrayed his scepticism) and opposition to Trident, which is hosted in the neighbouring constituency of Barrow-in-Furness, could put off local employees who usually stick to Labour.

But it’s not that simple. The constituency may rely on nuclear for jobs, but I found a notable lack of affection for the industry. While most see the employment benefits, there is less enthusiasm for Sellafield being part of their home’s identity – particularly in Whitehaven, which houses the majority of employees in the constituency. Also, unions representing Sellafield workers have been in a dispute for months with ministers over pension cut plans.

“I worked at Sellafield for 30 years, and I’m against it,” growls Fred, Billy’s friend, a retiree of the same age who also used to work at the colliery. “Can you see nuclear power as safer than coal?” he asks, wild wiry eyebrows raised. “I’m a pit man; there was just nowhere else to work [when the colliery closed]. The pension scheme used to be second-to-none, now they’re trying to cut it, changing the terms.”

Derek Bone, a 51-year-old who has been a storeman at the plant for 15 years, is equally unconvinced. I meet him walking his dog along the seafront. “This county, Cumbria, Copeland, has always been a nuclear area – whether we like it or don’t,” he says, over the impatient barks of his Yorkshire terrier Milo. “But people say it’s only to do with Copeland. It ain’t. It employs a lot of people in the UK, outside the county – then they’re spending the money back where they’re from, not here.”

Such views might be just enough of a buffer against the damage caused by Corbyn’s nuclear reluctance. But the problem for Labour is that neither Fred nor Derek are particularly bothered about the result. While awareness of the by-election is high, many tell me that they won’t be voting this time. “Jeremy Corbyn says he’s against it [nuclear], now he’s not, and he could change his mind – I don’t believe any of them,” says Malcolm Campbell, a 55-year-old lorry driver who is part of the nuclear supply chain.

Also worrying for Labour is the deprivation in Copeland. Everyone I speak to complains about poor infrastructure, shoddy roads, derelict buildings, and lack of investment. This could punish the party that has been in power locally for so long.

The Tory candidate Trudy Harrison, who grew up in the coastal village of Seascale and now lives in Bootle, at the southern end of the constituency, claims local Labour rule has been ineffective. “We’re isolated, we’re remote, we’ve been forgotten and ignored by Labour for far too long,” she says.

I meet her in the town of Millom, at the southern tip of the constituency – the opposite end to Whitehaven. It centres on a small market square dominated by a smart 19th-century town hall with a mint-green domed clock tower. This is good Tory door-knocking territory; Millom has a Conservative-led town council.

While Harrison’s Labour opponents are relying on their legacy vote to turn out, Harrison is hoping that the same people think it’s time for a change, and can be combined with the existing Tory vote in places like Millom. “After 82 years of Labour rule, this is a huge ask,” she admits.

Another challenge for Harrison is the threat to services at Whitehaven’s West Cumberland Hospital. It has been proposed for a downgrade, which would mean those seeking urgent care – including children, stroke sufferers, and those in need of major trauma treatment and maternity care beyond midwifery – would have to travel the 40-mile journey to Carlisle on the notoriously bad A595 road.

Labour is blaming this on Conservative cuts to health spending, and indeed, Theresa May dodged calls to rescue the hospital in her campaign visit last week. “The Lady’s Not For Talking,” was one local paper front page. It also helps that Labour’s candidate, Gillian Troughton, is a St John Ambulance driver, who has driven the dangerous journey on a blue light.

“Seeing the health service having services taken away in the name of centralisation and saving money is just heart-breaking,” she tells me. “People are genuinely frightened . . . If we have a Tory MP, that essentially gives them the green light to say ‘this is OK’.”

But Harrison believes she would be best-placed to reverse the hospital downgrade. “[I] will have the ear of government,” she insists. “I stand the very best chance of making sure we save those essential services.”

Voters are concerned about the hospital, but divided on the idea that a Tory MP would have more power to save it.

“What the Conservatives are doing with the hospitals is disgusting,” a 44-year-old carer from Copeland’s second most-populated town of Egremont tells me. Her partner, Shaun Grant, who works as a labourer, agrees. “You have to travel to Carlisle – it could take one hour 40 minutes; the road is unpredictable.” They will both vote Labour.

Ken, a Conservative voter, counters: “People will lose their lives over it – we need someone in the circle, who can influence the government, to change it. I think the government would reward us for voting Tory.”

Fog engulfs the jagged coastline and rolling hills of Copeland as the sun begins to set on Sunday evening. But for most voters and campaigners here, the dense grey horizon is far clearer than what the result will be after going to the polls on Thursday.

Anoosh Chakelian is senior writer at the New Statesman.