Regional Pay

John Pugh Excerpts

Wednesday 20th June 2012 Commons Chamber

[John Pugh (Southport) (LD)]

I thank the hon. Member for Dumfries and Galloway (Mr Brown) for that introduction; I am not used to it.

The battle over regional and local pay is one, frankly, that in the current circumstances the coalition could do without. It would be a battle—a gruelling, energy sapping and pointless battle between and within parties. Even the Labour party is divided on its proposals for regional welfare. Opposition among the Liberal Democrats to the underlying principle and philosophy behind the suggestions is now widespread. We are not against the collection of evidence, but the evidence means that we are against the proposals. Shortly I and a number of colleagues will submit evidence that we hope will convince further. There was no problem recently getting 22 Liberal Democrat Members to sign a letter to The Times opposing regional pay, and of course those numbers were limited because our ministerial colleagues could not be asked to participate.

The politics of the proposal are lethal and divisive. It pits region against region, abandons the principle of equal pay for equal work, and treats the low-paid and local differently from the high-paid and mobile. The economics of it are nonsense, too, being bolstered largely by clichés and prejudice from the usual suspects—the Institute of Directors to name but one.

[Kelvin Hopkins (Luton North) (Lab)]

It is refreshing to hear some common sense from the Liberal Democrats. The hon. Gentleman might be aware that a survey reported by the CBI suggests that 94% of private sector employers are concerned, above all, about markets and consumer demand for their goods and services, and the proposal would reduce consumer demand.

[John Pugh]

That is certainly true, and a lot of UK national firms—building societies, banks and the like—do not have regional pay structures.

No one can dispute that reducing public sector pay in low-wage areas necessarily reduces the money spent, and therefore demand, in those areas. No one can dispute that putting relatively more money into the pockets of public sector workers in high-wage areas increases the money in circulation in those areas, and thus demand. Ultimately, economic division will be cemented in and, frankly, a good reason would be needed for doing that.

[Jacob Rees-Mogg (North East Somerset) (Con)]

The hon. Gentleman said that no one would dispute his points, but I will. If more private sector employment is created, greater total pay is created in the region, thus increasing demand.

[John Pugh]

That is my next point, because the only good reason for taking forward the approach would be if it was thought that it would improve private sector job opportunities in the poor regions on the basis that public sector jobs appear to be relatively well paid and crowd out private sector employment. If that is happening, one piece of essential evidence—one killer fact—is needed to show that, but it is not differences in the rates of pay in the two sectors, because that reflects a range of things such as job profiles and qualifications. We need evidence to show that as the number of public sector jobs increased in such regions, the number of unfilled vacancies for comparable employment in the private sector grew. That would be the clinching fact, but there is no such evidence. In fact, vacancies in the public sector in the north take longer to fill, because 50% of them are out for eight or more weeks compared with 15% in the private sector. Jobs that pay a living wage and for which skills exist get snapped up. Vacancies do not abound in the private sector except where there are definite skills shortages, and that is because of unemployment. There is no parallel difficulty with failing to fill public sector vacancies in better-off areas.

In the absence of that one piece of clinching evidence, which simply is not there, one could take a barrow-boy view that one could none the less get away with paying people less in the public sector in less advantaged areas, and especially get away with lower pay for the less well-paid, thus banking a cash saving for the state. I understand that argument, but it would be a wholly inappropriate way for a state to behave. It would be inappropriate for the state to discriminate simply by doing what can it get away with. We do not pay women or ethnic minorities less because they might be willing to work for less. If it was easy to get people to take the king’s shilling in the north, would we offer them sixpence instead?

[Mr Burley]

We already pay every public sector worker outside London less because of the long-established principle of the London weighting. Would the hon. Gentleman abolish the London weighting and pay everyone the same as people working in London?

[John Pugh]

The special housing problems connected with London have been recognised for about 30 years. No one is arguing about that—it is not what the Government are arguing for, and it is not what divides the House.

I have been in politics for quite a long time and worked hard in my region. I have met oodles of people, worried and fretted about regional regeneration, met industrialists, attended forums and spoken to experts. However, no one outside London has ever said to me, “Do you know what we want in this area? What we really need is regional pay.”