Regional Pay

Debate between Lord Maude of Horsham and Baroness Primarolo

Wednesday 20th June 2012 Commons Chamber

[Mr Maude]

I am going to make progress now.

That policy was introduced at a time when those who are now on the Opposition Front Bench were intimately involved, so it is worth the House asking itself what happened. Did devilish civil servants somehow slide this wicked measure through, as the attention of the current shadow Chancellor and Leader of the Opposition was elsewhere, no doubt overly occupied in trashing the then Prime Minister?

Why is the shadow Chief Secretary to the Treasury taking up valuable parliamentary time attacking in opposition a policy that her own leaders actively promoted in government? It is not as if the Labour party immediately abandoned the idea in opposition that local and regional variations in the cost of living are important. In January, The Guardian reported that the right hon. Member for Birmingham, Hodge Hill (Mr Byrne)—another previous holder of my post—told a private meeting of Labour MPs that housing benefit

“varies locally and so should a benefit cap”.

In fact, he was reported to have said:

“It makes much more sense to have localised caps…in different parts of the country”.

That revealed that the Labour party still recognises in private the very principle that it is today seeking to oppose. It is humbug, Madam Deputy Speaker. Yet again, the Opposition oppose policies that they introduced in government and that they still support in private.

We know what is behind this. It is the Labour party’s union paymasters who are calling the tune. We know that the Labour party ask their union backers which amendments to vote for and which to oppose. We know that under the current Labour party leader more than 80% of Labour’s donations come directly from trade unions—even more than under the last Prime Minister. No wonder Charlie Whelan boasted that it was Unite that won the current Labour party leadership. Yet again, it is Unison and Unite that are calling the tunes. But even the unions are confused on this matter. As my hon. Friend the Member for Cannock Chase (Mr Burley) said, Unison itself has made the case for local variations.

There is a serious case to be made for local market-facing pay. While private sector pay is typically set according to local markets, public sector pay is usually set on a one-size-fits-all basis at national level. As a result, public sector workers are often paid more than private sector workers in similar jobs in the same area. According to the Institute for Fiscal Studies, the overall gap between public and private sector pay averages 8.3%. However, the gap can be as low as virtually minimal in some places and as high as nearly 20% in others.

Academic research also shows that public sector pay is only 40% as responsive to local labour markets as private sector pay. That has potentially damaging consequences for the public sector and the economy. A one-size-fits-all system for public sector pay could limit the number of public sector jobs that could be supported in lower-cost areas. It militates directly against the relocation of public sector jobs to more deprived parts of the country. Private employers looking for staff to set up or grow their businesses might need to compete with much higher public sector wages. The evidence has yet to be examined, but the public sector could be crowding out the private sector in that way, and holding back the private sector-led recovery that the economy needs. Arguably, this makes private sector job creation less attractive. Importantly, it also makes it less attractive to move public sector jobs out of London and the south-east because, without any differential in pay rates to reflect the differential in living costs, it is much less easy to justify the relocation costs and loss of continuity that relocating inevitably involves.

So this approach is about investigating whether this could be another way of supporting local economies, by helping to provide more public sector jobs for the same level of spending and by helping the local private sector to become more competitive and to expand. This could help poorer areas to grow—[Interruption.] Exactly that point was recognised explicitly by the previous Prime Minister. He made exactly that argument. The hon. Member for Leeds West might want to argue with him, but we think that this is one of the few things on which he was right.

More broadly, this Government are determined to support regional private sector growth. Since the last election and the formation of the coalition Government, 843,000 private sector jobs have been created, and promoting regional growth—[Interruption.]

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I am sorry, Minister. It is not necessary for Members on either side of the House, especially those on the Front Benches, continually to shout across the Floor. This is an important and heated debate—[Interruption.] I do not know why you are tut-tutting, Ms Bray; you have been doing a fair bit of shouting as well.

[Mr Maude]

We would have made better progress if, every time anyone stood up, the hon. Member for Leeds West had not recited the number of public sector workers in their constituency. She could just have laid the document before the House and we could have taken it all as read. It was a pretty poor substitute for an argument, but I suppose it was the best that she could do.

We are committed to supporting regional private sector growth. As I was saying, 843,000 private sector jobs have been created since the general election, and promoting regional jobs is at the very heart of our growth strategy. In the autumn statement, we announced an additional £30 billion of investment—

Public Bodies Reform

Debate between Lord Maude of Horsham and Baroness Primarolo

Thursday 14th October 2010 Commons Chamber

[Mr Maude]

That is an admirable suggestion, which I will take away and ponder.

[Madam Deputy Speaker (Dawn Primarolo)]

I thank hon. Members and Ministers. A great many Members managed to ask short pithy questions on the statement and the answers were also short.