Regional Pay

Phil Wilson Excerpts

Wednesday 20th June 2012 Commons Chamber

[Rachel Reeves]

Perhaps those 10,500 public sector workers can give their verdict at the ballot box. Yes, we do need a private sector recovery, but we will not achieve that by cutting the pay of the people who deliver our public services.

[Phil Wilson (Sedgefield) (Lab)]

Can we put to bed the idea that public sector jobs crowd out private sector jobs? Between 2003 and 2008 the number of public sector jobs increased by 4.1% and the number of private sector jobs went up by 9.2%. That belies the case that the Government always make that public sector jobs crowd out private sector jobs.

[Rachel Reeves]

My hon. Friend makes a very important point.

--- Later in debate ---

[Mr Maude]

The hon. Gentleman has failed to listen either to what the previous Prime Minister and Chancellor said, to what his own Government introduced or to what we have said, which is that this is not about regional pay, and nor has it ever been.

[Phil Wilson]

I think the Minister has been a bit selective in quoting Treasury Ministers in the previous Government. Treasury guidance notes put out by Ministers in 2003 also stated:

“At the extreme, local pay in theory could mean devolved 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.”

In other words, the previous Labour Government were never going to do what this Government intend to do now.

[Mr Maude]

Given that the hon. Gentleman has not given me the chance to talk about our plans and approach, perhaps he will be patient and contain himself until that moment.

As I was about to say, nothing has yet been decided. Any proposals for each work force must be based on strong evidence. We want to hear from everyone with a contribution to make, and we are committed to making any future decision on the basis of evidence, which is the right way to approach the matter. That is why we have invited the various pay review bodies to consider the matter on that basis.

However, as I said earlier, we are not the only Government to think that there is a case for looking at this issue. The case was recognised by the last Government, and they gave it, I presume, serious thought. Indeed, in 2003, the then Chancellor announced a stronger local dimension to pay review body remits, noting that there was significant scope to increase the flexibility and responsiveness of public sector pay. He told the House:

“With this national framework for fairness in place, 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”.—[Official Report, 9 June 2003; Vol. 406, c. 412.]

Does anyone on the Opposition Benches disagree with that? It seems a considered and sensible approach to me.

--- Later in debate ---

[Mr Burley]

I want the private sector in the west midlands to flourish. One of the most astonishing facts I have learned since becoming an MP is that between 1997 and 2007 the number of jobs in the private sector in the entire west midlands region fell. During the boom years of the hon. Gentleman’s Government, private sector employment went down, and I do not want to crowd out private sector growth in the west midlands. That is why this regional pay debate is so important.

I read an amazing article on the ConservativeHome website, with which I totally disagreed. It stated:

“Many Tory MPs with small majorities need to keep as many public sector workers onside as possible in order to keep their seats at the next election…For this reason, expect Lib Dems and low-majority Tory MPs to have grave concerns about any regional pay proposals—and expect the plans to be significantly changed or dropped altogether.”

Well, I am a low-majority Tory MP, and I believe this House is at its best when it is at its boldest, and I would be greatly saddened if everything we did was driven by narrow regard for our own majorities and saving our own skin and seats.

The fact that the shadow Chief Secretary to the Treasury, the hon. Member for Leeds West (Rachel Reeves), read out the number of state workers in each of our constituencies says all we need to know about Labour’s approach: stuff their mouths with gold and buy votes. That is the approach of the Labour party, and the hon. Lady did precisely that tonight.

We must do what is right for the country, and what is right for the country is for the Government to do everything they can to enable the private sector to flourish, so that it can pay the taxes that fund the vital public services that all our constituents rely on, not just fund the pay of the public sector workers who happen to live in our constituencies.

[Phil Wilson]

What advice would the hon. Gentleman give to his party colleague, the hon. Member for Hexham (Guy Opperman), who has a substantial majority and who has said that there is no economic case for regional pay?

[Mr Burley]

I am sure we will hear from my hon. Friend in due course, and I will let him make his own arguments, but in the very short time I have left I want to focus on the principle behind this debate, which is whether there are different costs of living in different parts of the country and, if so, whether that should be reflected in state pay. The simple answer to both those questions is yes.

Someone commented in response to the ConservativeHome article to which I have referred:

“Perhaps an experiment over a 2 year period to prove Regional Salaries are such a great idea? Begin with MPs and their staff. No doubt they will jump at the chance to lead by example?”

I propose to do exactly that. I have to hand the Independent Parliamentary Standards Authority bandings for accommodation expenditure—the amount that can be claimed by MPs to live in their constituency. Guess what? Yes, they vary by constituency. As MP for Cannock Chase I could claim £10,950 a year to pay my rent and bills, if I were to claim expenses for living locally, which I do not. The Member for Cambridge can claim £15,150—nearly 50% more than I can claim. The Members for North Somerset and North West Hampshire can claim £13,750, whereas the Member of North Swindon can claim just £12,350. So there we have it: there is regional variation in what MPs can claim to live, based on the cost of living in their area. If it is good enough for MPs, why should it not be reflected in the pay packets of other public sector workers?

Let us examine the arrangements for employing our staff. If I employ a senior caseworker in the London area, I have to pay him £23,000 to £31,000. If I employ him in my constituency, I have to pay him only £19,000 to £28,000. A senior parliamentary assistant can be paid up to £42,000 in London, whereas they can start on just £30,000 in my constituency. So the answer to the blogger is that MPs and their staff are already subject to regional variations in pay and allowances, and are living proof of the established principle of regional pay born out of different regional costs of living.

Let us put it the other way round: if the Opposition truly believe in national pay bargaining and public sector salaries being set nationally, will they intervene on me now to say that my staff in London should have their salaries reduced to match those of my staff in Cannock? Or should I be able to claim as much to live in a house in Cannock as to live a house in Cambridge? Of course not. Today’s debate is about whether public sector pay should be relative to private sector wages, and the simple truth is that it must.

The shadow Chief Secretary to the Treasury has said that regional pay will

“prove costly to the public purse and exacerbate regional inequalities”.

On the contrary, crowding out the private sector in the regions of our country is what will exacerbate regional inequalities, and setting a higher than locally appropriate wage bill means that public sector money is not allocated as effectively as it could be within local areas. I noted that she did not reply to the quote in my intervention, so I will repeat it to her now. Unison has said in its location-based pay differentiation paper of September 2011 that

“location-based pay systems offer increased flexibility and a systematic approach to addressing recruitment and retention issues at a local level.”

Government Members agree with Unison in that analysis, and I shall be interested to hear whether any Labour Members, many of whom will doubtless be taking donations from Unison to their constituency Labour parties, also do.

The Government are right to look at more local, market-facing pay and to end the anomaly of national pay bargaining—

--- Later in debate ---

[Jessica Morden]

We are pushed for time, and if I give way, I will prevent someone else from getting in, so I will kindly say no.

We have had 9,000 public sector job cuts in Wales, and there are 39,000 more to come, according to the TUC. The stock argument for the Government’s proposal is that it would allow the private sector to grow by enabling it to compete with the public sector for staff. This is clearly nonsense in constituencies such as mine, where any move on regional pay would hurt the economy, including the private sector.

[Phil Wilson]

rose—

[Jessica Morden]

I will give way to my hon. Friend, because he will not get a chance to make a speech, whereas the hon. Member for Cannock Chase (Mr Burley) has already spoken.

[Phil Wilson]

I hope that the hon. Member for South West Norfolk (Elizabeth Truss) understands that Opposition Members know about globalisation and its effect on the private sector. Hitachi, a big global company, is coming to the north-east of England, but it is not considering local pay; it is considering sectoral pay rates and skills, and looking across the train-building industry. It is not looking locally.

[Jessica Morden]

I thank my hon. Friend for his intervention. I am sorry he has not had a chance to make his contribution. He is exactly right.

The TUC has estimated that a 1% reduction in public sector pay could result in £97 million being taken out of the Welsh economy. In constituencies such as mine, the public and private sectors are inextricably linked, and money taken out of the public sector hurts the private sector. Members should not just take our word for it; over the past few weeks, the Federation of Small Businesses in Wales has come out in opposition to regional pay. We saw this firsthand in Newport, when the Government were forced to concede over closing Newport passport office with the possible loss of 300 jobs. The Government conceded then that the closure would have a huge impact on our local economy, and many small local businesses were right at the heart of the campaign to keep the passport office open, because they knew full well that their livelihoods depended on it.

There are 23,000 public sector workers in Newport. It has a lot of public sector jobs precisely because of the previous Government’s policy, following the Lyons review, of moving jobs from the south-east to rebalance the economy. As a result, our major employers, as well as the NHS and the local authority, are the Office for National Statistics, the Prison Service and the Intellectual Property Office, to name but a few. This has been a boost to our city and is a real success story. As an ONS worker said to me recently, however, does paying him less mean that the private sector in Newport will suddenly be clamouring for statisticians? We both thought not.

Of course, regional pay is plain unfair. I have a border constituency. If I have two teachers in my constituency, one working in Caldicot, the other in Bristol, with the same skills and experience but paid differently, that is clearly unfair. Let us remember that these people are not hugely well paid—they are often on wages of about £20,000—and would find it difficult to move jobs if this measure was implemented.

Finally, comparing private and public sector pay is not comparing like with like. There are more people with higher qualifications in the public sector than in the private sector, and women, who make up 64% of the public sector work force in Wales and 87% of part-time workers, have very much benefited from the previous Government’s efforts on equal pay. I ask the Government please not to target these women and roll back progress on them. Regional pay, local market-facing pay, or whatever the Government want to call it, will be a race to the bottom on lower pay, and create higher unemployment and more business failures. It is a real pity that we do not have a Secretary of State for Wales willing to stand up and say that.

--- Later in debate ---

[Phil Wilson (Sedgefield) (Lab)]

Thank you, Mr Deputy Speaker, for that generous offer.

We have heard from Government Members that, on the one hand, we introduced regional pay, yet on the other hand that we have a one-size-fits-all system, making it either one or the other. As far as I am concerned, this is not about public sector versus private sector; it is about what is fair for people in whatever sector they happen to work in. Let us think about the situation in County Durham. Unemployment in Sedgefield has risen by nearly 25% in the last year, and the number of people out of work for more than six months has risen by 100%. Moreover, 120,000 households in County Durham will be hit by benefit changes which will take £151 million from the local economy. The average wage is £418 a week, which is well below the national average. Regional pay will not benefit local businesses, because there will no longer be any drive for people to buy anything that is manufactured or created in the area. As for the idea that there are no national pay schemes in the private sector, Tesco has one and so has Nissan. They will not be looking only at local pay rates; they will be looking at the sector in other parts of the country as well, and also at skills.

I believe that this proposal is ideologically driven, and that it makes no economic sense whatsoever. I agree with the hon. Member for Hexham (Guy Opperman). Early-day motion 55, which I sponsored, was signed by Members on both sides of the House, and it is clear that there is a great deal of cross-party opposition to the measure. I strongly urge the Government to withdraw it and to think about what is fair to not just the public sector but the private sector, because this measure will damage both sectors if it goes ahead.