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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“We can’t do this again”: Labour conference reactions to Jeremy Corbyn’s second victory

Overjoyed members, determined allies and concerned MPs are divided on how to unite.

“I tell you what, I want to know who those 193,229 people are.” This was the reaction of one Labour member a few rows from the front of the stage, following the announcement of Jeremy Corbyn’s victory at the Labour party conference. She was referring to support received by his defeated contender, Owen Smith, who won 38.2 per cent of the vote (to Corbyn’s 61.8 per cent).

But it’s this focus on the leader’s critics – so vehement among many (and there are a lot of them) of his fans – that many politicians, of either side, who were watching his victory speech in the conference hall want to put an end to.

“It’s about unity and bringing us all together – I think that’s what has to come out of this,” says shadow cabinet member and MP for Edmonton Kate Osamor. “It shouldn’t be about the figures, and how many votes, and his percentage, because that will just cause more animosity.”

Osamor, who is supportive of Corbyn’s leadership, is not alone in urging her colleagues who resigned from the shadow cabinet to “remember the door is never shut”.

Shadow minister and member of Labour’s National Executive Committee (NEC) Jon Ashworth – not a Corbyn loyalist, but focusing on making the shadow cabinet work together – shares the sentiment.

Standing pensively in front of the now-empty stage, he tells me he backs shadow cabinet elections (though not for every post) – a change to party rules that has not yet been decided by the NEC. “[It] would be a good way of bringing people back,” he says. “I’ve been involved in discussions behind the scenes this week and I hope we can get some resolution on the issue.”

He adds: “Jeremy’s won, he has to recognise a number of people didn’t vote for him, so we’ve got to unite.”

The former Foreign Secretary Margaret Beckett, another MP on the NEC, is sitting in the audience, looking over some documents. She warns that “it’s impossible to tell” whether those who resigned from Corbyn’s shadow cabinet would be willing to return, and is concerned about talent being wasted.

“We have a lot of excellent people in the party; there are new people now in the shadow cabinet who have had a chance to show their mettle but you need experience as well as ability,” she says.

Beckett, who has urged Corbyn to stand down in the past, hopes “everybody’s listening” to his call for unity, but questions how that will be achieved.

“How much bad blood there is among people who were told that there was plotting [against Corbyn], it’s impossible to tell, but obviously that doesn’t make for a very good atmosphere,” she says. “But Jeremy says we’ll wipe the slate clean, so let’s hope everybody will wipe the slate clean.”

It doesn’t look that way yet. Socialist veteran Dennis Skinner is prowling around the party conference space outside the hall, barking with glee about Corbyn’s defeated foes. “He’s trebled the membership,” he cries. “A figure that Blair, Brown and Prescott could only dream about. On average there’s more than a thousand of them [new members] in every constituency. Right-wing members of the parliamentary Labour party need to get on board!”

A call that may go unheeded, with fervent Corbyn allies and critics alike already straying from the unity message. The shadow justice secretary Richard Burgon is reminding the PLP that, “Jeremy’s won by a bigger margin this time”, and telling journalists after the speech that he is “relaxed” about how the shadow cabinet is recruited (not a rallying cry for shadow cabinet elections).

“If Jeremy wants to hold out an olive branch to the PLP, work with MPs more closely, he has to look very seriously at that [shadow cabinet elections]; it’s gone to the NEC but no decision has been made,” says Louise Ellman, the Liverpool MP and transport committee chair who has been critical of Corbyn’s leadership. “That might not be the only way. I think he has to find a way of working with MPs, because we’re all elected by millions of people – the general public – and he seems to dismiss that.”

“If he sees it [his victory] as an endorsement of how he’s been operating up until now, the problems which led to the election being called will remain,” Ellman warns. “If we’re going to be a credible party of government, we’ve got to reach out to the general electorate. He didn’t say anything about that in his speech, but I hope that perhaps now he might feel more confident to be able to change direction.”

Corbyn may have called for cooperation, but his increased mandate (up from his last stonking victory with 59.5 per cent of the vote) is the starkest illustration yet of the gulf between his popularity in Parliament and among members.

The fact that one attempt at a ceasefire in the party’s civil war – by allowing MPs to vote for some shadow cabinet posts – is in contention suggests this gulf is in danger of increasing.

And then where could the party be this time next year? As Osamor warns: “We should not be looking at our differences, because when we do that, we end up thinking it’s a good thing to spend our summer having another contest. And we can’t. We can’t do this again.”

Anoosh Chakelian is deputy web editor at the New Statesman.