Regional Pay

Grahame Morris Excerpts

Wednesday 20th June 2012 Commons Chamber

[Grahame M. Morris (Easington) (Lab)]

I was rather perplexed by the Minister’s response. My impression is that if it walks like a duck, talks like a duck and quacks like a duck, it is a duck. The Minister, however, says he is in favour of national pay negotiations, but wants to change how they are delivered regionally. As I say, I am confused about whether this is a U-turn, or is it two U-turns so that the Minister is facing in the same direction? It seems as if that is exactly what has happened.

Any decision to allow regional pay differences for low-paid workers in the public sector would only exacerbate the economic and social north/south divide. In fact, we recently had a Westminster Hall debate in which some of the relevant statistics and factors were put on the record. The announcement in the autumn statement that this was on the Government’s agenda came without any prior evidence base for such a move. When Ministers talk about how public sector pay might better reflect local markets, they mean only one thing—pay less to people in poorer areas such as ours.

Rebalancing our economy for the future and addressing the north/south divide should be a Government priority. However, these proposals for regional or local pay differentials—whatever the terminology—would simply entrench that divide. The north-east is facing a double-dip jobs crisis. Government policies of slash and burn in the public sector are hitting the north-east hardest, and the promised private sector-led recovery was always a Tory mirage. [Interruption.] Let me remind Conservative Members who are heckling from a sedentary position that the figures for the north-east show unemployment now standing at 145,000—up 8,000, providing a regional figure of 11.3%, which is an absolute disgrace. Regional pay in the public sector would only make things worse, turning the north-east, and indeed other peripheral regions, into low-pay ghettos.

[David Mowat (Warrington South) (Con)]

I thank the hon. Gentleman for giving way, as I have been trying to intervene for a while. He makes a point about the north/south divide, about which many hon. Members on both sides are concerned. Will he concede that in the last year of the previous Government, the gross value added difference between London and the north-east reached the highest level for a decade and a half? I do not think that was due to the present Government, so what was it due to?

[Grahame M. Morris]

I shall come to that point. Under the last Government, the GVA differential was considerably reduced over 10 years. I do not have much time, but if the hon. Gentleman reads the Hansard report of the Westminster Hall debate, he will find all the information there.

In trying to justify his proposals, the Minister mentioned the evidence base, as did the hon. Member for Stourbridge (Margot James). That worries me. Pay review bodies and police boards oversee a pay bill of about £95 billion, and any changes in the distribution of that money would have major consequences. The reverse multiplier and the taking of moneys from local economies are a huge issue, and the benefit changes have already had a terrible effect on the economy in the north-east.

I refer the Minister and the hon. Member for Stourbridge to the Government’s own evidence to the current review, which includes some key sets of figures that I found intriguing. According to that evidence, statistics from the Office for National Statistics on regional price levels relative to national price levels show that, if London is excluded, price levels throughout the United Kingdom vary by only 5.3%, from 97% in Yorkshire and the Humber to 102.3% in the south-east. In my region, the north-east, the price level is 98.2%. Those figures show the smallest variation in price increases throughout the United Kingdom. If the Government proceeded with their proposal to vary pay levels in the public sector, those in the poorest regions, such as the north-east, would be worse off while the wealthiest regions benefited to the tune of billions.

[Ian Mearns]

All of us in north-east England are calling for an economic stimulus to create demand and grow the economy. This measure would apply an economic sedative to regions such as ours.

[Grahame M. Morris]

I agree with my hon. Friend’s analysis.

The other likely negative impact of the Government’s policy is a brain drain from the regions with lower pay to those with higher pay. In my opinion, the Tory party has never understood the values and principles of our public services, which were founded on fairness and equity. What is truly outrageous is that Ministers waste their time targeting low-paid public servants when the real crisis is in the private sector. I believe that those are diversionary tactics, and that, if implemented, they would take more money out of the northern regions, which are already suffering from a lack of demand throughout our economies.

The United Kingdom is crying out for a serious new industrial policy that would reduce regional inequalities and close the north-south divide. A regional pay policy of the sort that the Government propose would only make the position worse, and it lacks an evidence base. Any comparison between public and private sector pay is a very crude measure. There are far more highly qualified workers in the public sector, there is a smaller gap between the top and bottom levels of pay, and there is a smaller gender pay gap. The majority of low-paid work in catering or cleaning, for example, is in the private sector. Similar roles in the public sector are often outsourced, which skews the figures still further.

The hon. Member for Warrington South (David Mowat) asked about figures relating to growth rates and relative performance. Under the last Labour Government, the rate of growth in my region, the north-east, went from being the lowest in any region during the 1990s to being the second highest during the last decade. Between the mid-1990s and the global economic downturn of 2008, employment growth increased by 11.2% in the north-east and by 9.2% nationally. Between 2002 and 2008, private sector employment in the north-east rose by 9.2% while public sector employment grew by 4.1%, a point made by my hon. Friend the Member for Sedgefield (Phil Wilson). Between 1999 and 2007, the number of businesses in the north-east rose by 18.7%, which compares favourably with London’s business growth of 19.6% during the same period.

[Madam Deputy Speaker (Dawn Primarolo)]

Order. The hon. Gentleman’s time is up.