Regional Pay

Chris Williamson Excerpts

Wednesday 20th June 2012 Commons Chamber

[Rachel Reeves]

My hon. Friend speaks powerfully on behalf of her constituents in the Wirral, and I know they will appreciate that.

[Chris Williamson (Derby North) (Lab)]

Would my hon. Friend care to comment on the fact that yet again the Chief Secretary to the Treasury has gone AWOL? We have had debate after debate in which the Government have rolled out junior Treasury Ministers, and now he has ceded his responsibility to the Cabinet Office. Can my hon. Friend shed any light on what on earth is going on?

[Rachel Reeves]

Given that the policies have such big implications for the public purse, especially as anticipated costs go up because of the extra bureaucracy, I would have thought the Chief Secretary had a clear interest in them.

I suggest that Ministers take this opportunity to call a halt to this exercise, end the uncertainty and confusion and put people’s minds at rest. They did that for charities, churches and caravans, and even for pasties. As the Prime Minister has said:

“When you’ve got something wrong, there are two things you can do in government: you can plough on regardless, or you can say, ‘No, we’re going to listen, we’re going to change it’”.

I therefore hope the Minister listens to what Members say in today’s debate and changes course before the Government get into even greater difficulty. Trying to make public sector workers in hard-hit parts of the country the scapegoats for our economic problems is disreputable and divisive, and it is a distraction from the task to which the Government should be giving their full attention—a plan for jobs and growth that can get us out of the recession they have got us into.

--- Later in debate ---

[Chris Williamson]

Will the Minister give way?

[Mr Maude]

I am going to make a little progress, but I will give way in due course.

Those pay remits are currently set at 1% a year. We need those constraints in order to address the appalling legacy of the biggest budget deficit in the developed world, which was left by exactly the people who now complain about its effects. Our approach is not about making further savings, but entirely about creating greater flexibility within those pay remit constraints.

Thirdly, this is not about cutting anybody’s pay. Even if we wanted to, we would not be legally able to do so.

--- Later in debate ---

[Mr Maude]

I will not give way, if the hon. Lady will forgive me, because I need to make some progress and Back-Bench contributions are already likely to be constrained because the debate started rather late.

The then Chancellor also said that pay for the civil service should include a stronger local and regional dimension, while in that year’s Budget he set out

“action to increase regional and local flexibility in public service pay”.

As I have mentioned, the then Chancellor’s advisers included the current Leader of the Opposition and the current shadow Chancellor. It seems pretty opportunistic for Labour, at the 11th hour, to produce this motion, when its own Government took the public sector further down this path than we are at this stage contemplating.

Indeed, Labour did not just talk about localised pay; it actually introduced it. In 2007, the last Government introduced localised pay for civil servants across the courts service. They did so in response to the Treasury’s pay guidance, issued in 2007, at a time when, as far as I can make out, the current Leader of the Opposition was the Minister in the Cabinet Office responsible for civil service matters and the shadow Chancellor was the Economic Secretary to the Treasury. Yet that pay guidance, which went out across the civil service, asked Departments that operated across different locations to differentiate between pay levels across regional labour markets. Following that guidance, which was issued under the aegis of the current Leader of the Opposition and the current shadow Chancellor, the previous Government introduced localised pay in the courts service across the country. That was, if I may say so, a sensible and unusually well-judged move, and it has been successful.

[Chris Williamson]

rose—

[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.]

--- Later in debate ---

[Chris Williamson (Derby North) (Lab)]

Make no mistake, Madam Deputy Speaker, the proposals for regional pay represent a naked ideological assault on public services and on public service workers. In my constituency, 11,800 people are employed in the public sector, representing more than 26% of its work force. Throughout Derby, 25,000-plus are employed in the public sector, and this is yet another example of the fact that this Government represent and stand up for the rich elite in our country, a Government who are prepared to give tax cuts to millionaires while forcing pay cuts on public sector workers.

I know from what Ministers have said that they want to weaken collective bargaining, but that makes no sense. It would be a wasteful approach to go down the road of regional pay because of all the duplication that would be necessary as a consequence of not having national pay bargaining regimes. It makes no economic sense either. Government Members have said that they see the economic recovery as being private sector led, but that ignores the symbiotic relationship between the public and private sectors. If huge demand is taken out of a local economy, that is bound to have knock-on implications for the private sector. This is a self-defeating proposition, because a private sector-led recovery will not be helped by attacking public service workers and undermining their salaries.

I am reading a book by Paul Krugman, a Nobel prize winner for economics, in which he says:

“disasters do happen; history is replete with floods and famines, earthquakes and tsunamis. What makes this disaster”—

the economic crisis that we are living through—

“so terrible—what should make you angry—is that none of this need be happening. There has been no plague of locusts; we have not lost our technological know-how; America and Europe should be richer, not poorer, than they were five years ago.

Nor is the nature of the disaster mysterious. In the Great Depression leaders had an excuse: nobody really understood what was happening or how to fix it. Today’s leaders don’t have that excuse. We have both the knowledge and the tools to end this suffering.”

I have not finished reading the book, but as far as I can see, he clearly does not recommend regional pay as a way of economic salvation.

I know that Government Members revel in the sobriquet, “Thatcher’s children”. However, back in 1993, when John Major was Prime Minister, the Government of the day considered regional pay but saw sense when the Treasury obtained an advice note about the proposition that said:

“At the extreme, local pay in theory could mean devolving pay…to local bodies. In practice, extremely devolved arrangements are not desirable. There are risks of workers being treated differently for no good reason. There could be dangers of leapfrogging and parts of the public sector competing against each other for the best staff.”

Do we really want a situation where a hospital such as Queen’s medical centre, down the road in my constituency, is competing for staff with the Royal Derby? I do not think so.

Over the past few weeks this Government have developed a penchant for U-turns. I would very much welcome a U-turn on this policy, which will be utterly counter-productive and undermine morale in public services, which has already been terribly undermined by the Government’s economically disastrous policies. It simply will not work. I say this to the Government: listen to Paul Krugman and other eminent economists, do a U-turn, and abandon these ridiculous proposals for regional pay.

[Several hon. Members]

rose—