Regional Pay

Debate between Margaret Curran and Chloe Smith

Wednesday 20th June 2012 Commons Chamber

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

This has been an interesting and lively debate. My hon. Friend the Member for Cannock Chase (Mr Burley) rightly disavowed a race to the bottom and instead seeks a race to reality. On the other hand, the hon. Member for Dumfries and Galloway (Mr Brown) thinks private sector rebalancing is dreamland. My hon. Friend the Member for Hexham (Guy Opperman) made a thoughtful, and personal, contribution. My hon. Friend the Member for South West Norfolk (Elizabeth Truss) raised international examples in a very well-informed contribution. My hon. Friend the Member for St Austell and Newquay (Stephen Gilbert) talked of the need for an evidence-based approach and eschewed opportunistic and divisive debate, hints of which we have heard this afternoon.

We also heard from my hon. Friend the Member for Aberconwy (Guto Bebb), who referred to days that we shared on the Welfare Reform Bill and wondered why the Opposition did not support the idea of capping benefits. Perhaps they may tell us today why they favour regionalising benefits but not pay.

Let me talk about what this Government have done, as I wrap up this debate. As my right hon. Friend the Minister for the Cabinet Office and Paymaster General said, this Government greatly value the work and dedication of public sector staff. However, at a time when private sector workers are living with falling wages and job uncertainty, and given the wider pressures we face on the public finances overall, there is a strong case for public sector pay bill restraint. This is why, at the autumn statement, we announced that public sector pay awards will average 1% for the two years following the end of the current public sector pay freeze.

It is also important to look at how public sector pay is set over the longer term. This is why, at the autumn statement, the Chancellor announced that there was a case for considering how local pay can better reflect private sector labour markets and invited the independent pay review bodies to consider the evidence. They will report back from July, and the Government will then consider their proposals. Nothing has yet been decided, and as my right hon. Friend the Minister for the Cabinet Office said, any proposals for each work force will need to be based on strong evidence.

However, it is clear that there is a case for looking at the issue. The pay review bodies have been asked to consider ways to recruit, retain and motivate suitably able and qualified staff across the UK.

[Margaret Curran]

rose—

[Miss Smith]

Perhaps the hon. Lady is going to tell me that she is not in favour of that.

[Margaret Curran]

Can we make it clear that I do not think the Chancellor was suggesting just that more research should be undertaken when he made his statement? Does the hon. Lady believe that a police officer in Hexham should be paid more or less than a police officer in Norwich?

[Miss Smith]

I will say, for the hon. Lady’s benefit, what I have already said: I look forward to the results of the research that the pay review bodies will be doing.

The gap between public and private sector pay varies significantly around the country, with the Institute for Fiscal Studies calculating a variation of up to 18%. That situation could needlessly limit the number of jobs, including perhaps those of police officers, that the public sector can support, and therefore the services that can be supplied. In addition, it could lead to unfair variations in the quality of public services through higher vacancy and turnover rates in some areas. Finally, it could also hurt the private sector, which often needs to compete for staff with the public sector. The CBI has said that it is essential to compete and that the Chancellor was right to ask for the exploration of the issue.

The need for pay levels that reflect local labour markets was of course recognised by the previous Government, when they took forward pay reform in the courts service. I will just dwell on that, because it has been discussed this afternoon. I suspect that the hon. Lady is not familiar with the fact that staff were given a choice about whether to opt in or out of that reform at that time, and the opt-in rate rose to 97% over 12 months. That is something to be welcomed. Let me jog memories further. The then Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who is again not in his place, set out plans. He said that in our country

“it makes sense to recognise that a more considered approach to local and regional conditions in pay offers the best modern route to full employment.”

Labour Members will wish to reflect on those words.

--- Later in debate ---

[Miss Smith]

I will not give way. The hon. Gentleman should rest his foot, as I had to myself several months ago. I wish him well and a speedy recovery.

It is somewhat troubling that shadow Ministers have not been able to explain whether they think it is good for small businesses in their constituency that the public sector pays 7.5% more overall than the private sector. They have not been able to explain, as I have mentioned, why they favour regionalising benefits and not pay. Perhaps they will surprise us all and stand firm against attempts to appease the unions, wait for the pay review bodies’ reports and take a mature decision based on the evidence available. That is what this Government will do. We do not seek to cave in to those who have given around £15 million to the Labour party in recent times.

The introduction of local and market-facing pay could help poorer regions, which I know Members on both sides of the House would welcome. It could do that by providing more public sector jobs for the same level of investment and by helping the local private sector to become more competitive and to expand. Tonight’s debate should not be about regional pay, about ending national pay bargaining or about cutting anybody’s pay. The Government recognise that public sector pay is a complex issue that varies significantly between public sector work forces.

[Margaret Curran]

Will the Minister explain at what level market-facing pay would be set for a police officer?

[Miss Smith]

The motion rests on a misrepresentation of the notion of regional or local, and the hon. Lady is attempting a second misrepresentation by bringing police officers in at this point, when the debate ought to be about the NHS and teachers, and the civil service where pay is under the control of central Government. She should know that.

Let me return to what the Government have done and complete my comments. The Government recognise that public sector pay is a complex issue that requires an evidential approach and varies significantly between public sector work forces. That is why we have asked the independent pay review bodies to consider the issue and why any decision will be based on the evidence. That is why we look forward to the outcome when the review bodies report next month.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.