Regional pay plan could widen gap

Idea previously vetoed in 2011

Chancellor of the Exchequer Philip Hammond CHANCELLOR Philip Hammond is said to be considering introducing a new regional pay system for public sector workers.

But this would be a terrible mistake – and would provide further ammunition for those who claim the Government doesn’t really care about the North and the Midlands.

Mr Hammond should learn the lessons of the past. Because his predecessor, George Osborne, also considered introducing regional pay, but scrapped the idea when he realised just how unpopular it would be.

According to reports, the Treasury is considering a regional pay plan for workers such as teachers, nurses and police officers as a way of saving money and allowing it to end the 1% cap on annual pay rises for public sector workers.

It’s not official policy. Often, when an unofficial proposal like this leaks, it means somebody is keen to push the idea but hasn’t yet convinced colleagues it’s the right thing to do.

There’s also a tendency to float ideas and see what sort of reaction they get before deciding whether to make it official policy.

But the Government has been down this road before.

Mr Osborne announced in 2011 he was asking pay review bodies to consider whether public sector pay should be varied according to local job market conditions.

The idea, bitterly opposed by unions, would have meant staff in parts of the North and Midlands received lower salaries than those in the south of England for doing the same job.

But the proposal was soon abandoned. The Liberal Democrats, the Tories’ thencoalition partners, claimed they forced the U-turn.

Although the policy is usually described as regional pay, it might be more accurate to call it a local pay deal.

Staff in city centres would have received higher salaries than those on the edges of cities, or in towns or rural areas.

This would have been the case across the country, so some workers in central Newcastle, for example, might have been paid the same as those in the south of England.

Incidentally, some public sector jobs already pay a premium to people working in central London. Local pay variations would have been on top of this.

The idea was to ensure public sector pay varies in a similar way to pay in the private sector, where location can affect salaries.

Documents published by the Treasury revealed pay in parts of the Midlands was considered to be 14% too high.

The trouble with this plan is that it reinforces pay gaps when the aim should be to close them.

And it takes money out of the economy in places which need economic growth the most.