Regional Pay

Rachel Reeves Excerpts

Wednesday 20th June 2012 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House notes that the national pay review bodies have been an effective way of setting pay while allowing for appropriate regional and local variation consistent with the need to recruit, retain and motivate staff and to keep tight control of public spending; believes that seeking to alter existing frameworks for negotiating and setting public sector pay could increase costs for the taxpayer as well as exacerbating regional inequalities; further notes that unanswered questions about Scottish separation risk uncertainty for the thousands of staff employed in Scotland under UK-wide pay negotiations and bargaining mechanisms; further believes that co-ordinated national negotiations can also reduce uncertainty, help financial planning and reduce costly and time consuming bureaucracy, local negotiations and disputes; and opposes moves intended to weaken or dismantle efficient and stable arrangements for negotiating and setting public sector pay.

We have called this debate today to give Members on both sides of the House an opportunity to raise concerns and ask questions about the Government’s plans for regional pay and to send a message that there is no appetite among nurses, teachers, police officers or, indeed, businesses in our constituencies for disrupting or dismantling the systems we have in place and going down a path that would escalate costs to the taxpayer and exacerbate regional inequalities. We are giving the Government an opportunity to dispel the confusion that they have created, and perhaps to get out of the hole that they have dug themselves into by executing another of the U-turns that have become something of a speciality of late.

Last autumn, the Chancellor announced his desire to make public sector pay

“more responsive to local labour markets”. —[Official Report, 29 November 2011; Vol. 536, c. 802.]

At the time he described it as a “very significant reform”, and one newspaper said that the Treasury regarded it as

“one of the most important measures it can introduce to rebalance the economy.”

The Chancellor’s supporters were excited. The hon. Member for Tamworth (Christopher Pincher) said enthusiastically that

“a truly local…negotiating structure”

would make wage rates in economically depressed communities more competitive.

More recently, there have been signs that the Liberal Democrats and, perhaps, 10 Downing street have become worried about the new mess that the Chancellor has got them into, with signals given out that nothing is decided and, in the words of the Deputy Prime Minister,

“there is no proposal on the table”.

In response, the hon. Member for Cannock Chase (Mr Burley) has called on the Chancellor to “hold firm”, and the hon. Member for South Northamptonshire (Andrea Leadsom) has said that national pay bargaining is the reason why businesses are struggling at the moment.

[Kevin Brennan (Cardiff West) (Lab)]

My hon. Friend may not be aware of this, but the Federation of Small Businesses in Wales has also come out against the Government’s proposals for regional pay. Should it not be a warning to them that they are on completely the wrong path?

[Rachel Reeves]

I am not surprised at all, because in reality, if regional pay were introduced and pay were cut in Wales and in other areas of the country, businesses would suffer because people would have less money in their pockets to spend with local companies.

Given the concern that the proposal has caused, the Government have a responsibility today to clarify their position and their plans. Was the Chancellor right when he said that it is a “very significant reform”, or was the Business Secretary right today when he said that there is no question of the Government imposing lower pay on people simply because they happen to live in poorer parts of the country? Those mixed messages have created confusion: confusion about the degree of localisation and variation being proposed; confusion about whether the Government propose to differentiate pay into regions, zones or local markets, which could itself mean many different things; and confusion about whether national bargaining structures would be maintained, replaced with local bargaining processes or dispensed with altogether.

All that we have from the Government is the evidence that the Treasury has submitted, alleging that in many parts of the country public sector workers are paid upwards of 10% more than their private sector equivalents.

[John Robertson (Glasgow North West) (Lab)]

Does my hon. Friend agree that the confusion being caused by the regional pay strategy, added to the fact that so many people are unemployed—unemployment is growing in my constituency—and that we are trying to get people into work, raises the question, “What are the Government trying to do?”? Do they want to get people into work, or do they want to ensure that people have jobs that they can afford to live with?

[Rachel Reeves]

I thank my hon. Friend for that intervention. As a result of that confusion, many people who are in work are worried about spending money, because they are not sure what is going to happen to their pay, and that uncertainty is also making economic recovery harder to secure.

Comparing rates of pay in the public and private sectors involves a notoriously complex and controversial analysis. It is difficult to be sure that one is comparing like with like, because the jobs done by teachers, police officers or emergency workers have so few private sector equivalents.

[Geraint Davies (Swansea West) (Lab/Co-op)]

My hon. Friend may be interested to know that inward investors to whom I have spoken are concerned to have decently funded public services in education and health; they do not want a GP in Swansea, for instance, to up sticks and go to Bristol. Does she agree that in many instances that analysis, concluding that different pay for the same job throughout the country will help the private sector, undermines the confidence of inward investors and is counter-productive?

[Rachel Reeves]

My hon. Friend speaks powerfully on behalf of his constituents in Swansea. In my area, many people commute from Bradford to work in Leeds and the other way round. Would their pay be determined by where they work or where they live? If the Government say that their starting point is these differentials, they cannot blame people for concluding that their ultimate aim is a reduction of 10% or more in the relative pay of public service workers in some parts of the country.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

When there is regional bargaining, in which I was once involved in a trade union, the complexities mean that there are more likely to be added costs. Indeed, the situation is the opposite of everything that happens as a result of what was created in 1908 by Whitleyism.

[Rachel Reeves]

My hon. Friend is absolutely right, and I will come on to deal with some of the evidence that backs up his point.

[Mr Ben Bradshaw (Exeter) (Lab)]

This is not just a cause for concern in Scotland, Wales and the northern regions of England. There is also deep concern in the south-west, where we have the biggest gap between wages and house affordability. Any regional pay structure is bound to involve a huge transfer of public money from regions such as the south-west to the wealthy south-east, and that is exactly the opposite of what the Government should be doing.

[Rachel Reeves]

I thank my right hon. Friend for that intervention. Indeed, a 1% pay reduction for public sector workers in the south-west would cost that region £140 million a year.

If the Government were to achieve their objective of reducing pay to what they say is the equivalent in the private sector, a real-terms cut in pay, year after year for a decade or more, would be needed. It is no wonder, then, that people are worried and are calling on the Government to come clean on what their plans really are. It is no wonder that people think this is a deliberate attack on public sector workers and on the parts of the country that have already been hardest hit by the recession.

[Chris Ruane (Vale of Clwyd) (Lab)]

Regional pay was mentioned this morning in the Welsh Grand Committee, when I quizzed the Secretary of State for Wales about it. The terminology that Government Members are using is not “regional pay” but “local-facing pay”. I asked for an explanation of what local-facing pay was, but got no response. Does my hon. Friend agree that if local-facing pay is introduced, there will be sad faces in Wales and happy faces in Buckinghamshire?

[Rachel Reeves]

The problem is that the Government are being a bit two-faced, with one person saying one thing and another saying something else.

The reality is that we are in a recession made in Downing street and it is hitting some parts of the country particularly hard. I quote from a recent report by the Institute for Public Policy Research on the state of the northern economy:

“The double-dip recession has hit the North hard, with unemployment rising and business confidence falling. This lack of confidence among employers has maintained the hiring freeze across the North, implying that upward pressure on unemployment is likely to continue for the rest of the year.”

The difficulties faced by workers and businesses in many parts of the country as a result of the recession that this Government have landed us in are being made all the more desperate by the Government’s short-sighted decision to dispense with policies and processes put in place by the Labour Government to support more balanced development across the UK. This is a Government who got rid of regional Ministers, shot down regional development agencies, and cut back on vital regional investments such as the loan for Sheffield Forgemasters. The only regional policy that they have left is regional pay, which will take more money out of some of the most deprived areas of the country.

[Elizabeth Truss (South West Norfolk) (Con)]

In the 1990s, Sweden moved from national pay scales to individual contracts. That was supported by the unions and resulted in a rise in some salaries for jobs where there was a shortage of workers—for example, kindergarten teachers—and it has been very successful. Is it not the case that other countries are moving to more competitive labour markets while we are moving backwards, as we did under the previous Government?

[Rachel Reeves]

I am sure that the 11,500 public sector workers in the hon. Lady’s constituency will know that she is sticking up for them.

[Mike Freer (Finchley and Golders Green) (Con)]

If the Opposition are so vehemently opposed to regional pay, will the hon. Lady be instructing Labour London MPs to give up their London weighting?

[Rachel Reeves]

I will come to the regional flexibility that is already in the system in inner and outer London for teachers and those in the health service. The point is that it is not necessary to dismantle the national system in this way to get the flexibility that we need.

We can imagine the impact that these changes might have on regional economies. If the north-east had a further year’s pay freeze imposed on it next year and the 1% increase that the Chancellor has announced was concentrated in more favoured areas, it would deprive the region’s economy of £78 million a year. If the same happened in other regions, Wales would lose £97 million a year, Yorkshire and the Humber £130 million, the south-west £140 million, as I said before, and Scotland £162 million.

Does the Minister really think that this policy will contribute to economic rebalancing? Is it really the best that the Government can come up with? Their only policy for jobs is to make it easier to fire people and their only policy for the regions is to cut the pay of public sector workers. It is no wonder that we are back in recession. It would be laughable if it was not so depressing.

There is no credible evidence to support the claim that the difficulties faced by the private sector are the result of national pay frameworks in the public sector.

[Margot James (Stourbridge) (Con)]

On that subject, the hon. Lady may be aware that the difference between private and public sector pay scales is as much as 18% in parts of the country. She talks about money being taken out of the economy, but does she not accept that if the pay scales were not so divergent, there would be additional private sector investment in those areas?

--- Later in debate ---

[Rachel Reeves]

I am sure that the 10,300 public sector workers in Stourbridge will be pleased to hear that the hon. Lady wants their pay to be cut.

Paul Callaghan CBE, the Sunderland technology entrepreneur and owner of the Leighton Group who was recognised in the recent Queen’s birthday honours list for services to the north-east, has said:

“I’m very concerned about the negative impact on the North East economy of regional pay rates.”

He went on to say that the

“freezing of regional public sector pay must reduce demand for local goods and services, further dampening an already depressed economy. I have seen no credible research to show that this move will have anything but a negative impact on both the region’s private and public sector.”

James Ramsbotham, the chief executive of the North East chamber of commerce, has said that

“the Government should be working towards making the economy more equal across the regions and not entrenching further disparity by reducing spending power in the North-East.”

The chief economist of the Welsh Government, in reviewing the impact of public sector pay rates on businesses in Wales, said that

“there is no credible academic evidence or research to indicate that crowding out has been happening in practice.”

[Mr Aidan Burley (Cannock Chase) (Con)]

I am glad that the hon. Lady read my quotation in The Daily Telegraph this morning. As she has read out a couple of quotations, perhaps I may read one back to her:

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

That is from Unison’s policy paper “Location-based pay differentiation”, which was published in September 2011. Does she agree with Unison, which I understand is a donor to her constituency party?

[Rachel Reeves]

The hon. Gentleman should speak to the 9,500 public sector workers in his constituency. That number is substantially larger than his majority.

What families and businesses in these parts of the country need is not an even tighter squeeze on the wages of the people who are keeping their public services running, but a Government with a proper plan for jobs and growth who will work actively with businesses to get investment flowing into the sustainable, competitive, high-value industries of the future. That is what we need to improve living standards and economic opportunities in every part of the country.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

My hon. Friend has highlighted the enthusiasm of the hon. Member for South Northamptonshire (Andrea Leadsom) for these measures. It may be helpful to share with the House the fact that the same Member is asking for exemptions from the minimum wage for employers. Perhaps that is the real agenda here.

[Rachel Reeves]

I thank my hon. Friend for mentioning that. That is how the Government will get the economy moving again—by cutting the pay of the most vulnerable workers and introducing regional pay.

[Andrea Leadsom (South Northamptonshire) (Con)]

rose—

--- Later in debate ---

[Rachel Reeves]

It will be interesting to hear what the hon. Lady has to say to the 10,800 public sector workers in her constituency and whether she wants them to have a pay cut.

[Andrea Leadsom]

I am grateful to the hon. Lady. I was going to say that my 10,500 public sector workers will no doubt agree with me that the way to get our economy going again is by a private sector-led recovery, which requires that businesses begin to thrive. Does she accept that it is a private sector, business-led recovery that will turn around our economy?

[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.

[Ian Mearns (Gateshead) (Lab)]

Given the perverse logic that Government Members put forward, will my hon. Friend reflect on the fact that despite the disparity in public and private sector pay rates in the north-east of England, unemployment is going up? We might have thought that investment would be flooding in on the basis of cheap wages in the private sector.

[Rachel Reeves]

I thank my hon. Friend for that point and look forward to hearing what the Minister has to say in response.

As well as the business people and other experts whom I have quoted, the key stakeholders have made their views clear. Not just the trade unions but employers and independent experts have expressed concerns. For example, NHS Employers notes that employers already have

“the option to pay recruitment and retention premia”—

that is related to the point made by the hon. Member for Finchley and Golders Green (Mike Freer)—

“to address…specific labour market issues.”

It states that a move to local pay bargaining would

“raise issues of local capacity, increase administration costs and risk pay inflation as employers compete directly for staff on pay. Getting rewards wrong could have a significant impact on the quality of patient care and safety.”

The National Employers’ Organisation for School Teachers states that

“the existing four national zones, plus the flexibility to pay recruitment and retention supplements…provide an appropriate balance between national determination and local flexibility…the existing framework provides a reasonable level of autonomy to set pay”.

It reports that 84% of its members

“considered that the number of pay bands was appropriate to reflect local labour market conditions; only 7% thought this was not the case.”

The National Governors Association reports that it is

“not aware of any evidence that suggests making pay locally responsive would improve recruitment and retention.”

It points out:

“Low cost of living indices tend…to be associated with social deprivation; these areas may also…have difficulty attracting the best staff… As the Government is rightly concerned to narrow the attainment gap between those children from disadvantaged backgrounds and those who are not, bringing teachers’ salaries in line with local market conditions…would possibly be counterproductive and create recruitment difficulties that do not currently exist.”

The evidence is clear, and so are the views of the experts, but the Chancellor’s posturing has created real worries for public service workers around the country. Nurses, teachers and police officers are already suffering the effects of the pay freeze and being hit by the sharp hike in pension contributions, and like everyone else they are suffering the effects of the Government’s recession, unfair tax rises and cuts. Now, the Chancellor is threatening to impose policies that for many people in many parts of the country would mean real-terms cuts in their income, continuing year after year. That would force them to pay the price for the Government’s economic failures. The millions of workers who are keeping our public services going in difficult times, the majority of them women on modest wages, deserve better than that.

[Alison McGovern (Wirral South) (Lab)]

Does my hon. Friend agree that the people who are being hit by the speculation about regional pay are the self-same people being hit by the withdrawal of the regional development agencies and speculation about NHS funding? The total picture created by the Government is the crushing of demand and undermining of confidence in Wirral and Merseyside, the parts of the country that I represent.

[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 ---

[Mr Maude]

We would have made better progress if, every time anyone stood up, the hon. Member for Leeds West had not recited the number of public sector workers in their constituency. She could just have laid the document before the House and we could have taken it all as read. It was a pretty poor substitute for an argument, but I suppose it was the best that she could do.

We are committed to supporting regional private sector growth. As I was saying, 843,000 private sector jobs have been created since the general election, and promoting regional jobs is at the very heart of our growth strategy. In the autumn statement, we announced an additional £30 billion of investment—

[Rachel Reeves]

Will the Minister give way?

[Mr Maude]

Only if the hon. Lady promises to read out the number of public sector workers in my constituency.

[Rachel Reeves]

I do not think that the Minister wants to cut their pay. Does he think that teachers in Horsham should be paid more than those in Leeds West?

[Mr Maude]

Under the hon. Lady’s own Government’s policy of introducing academies, it will increasingly be a matter for the management of those academies to set their own pay rates. So the policy that her Government set in train will, over time, lead to differentials coming into existence. Perhaps she will tell us whether she supports the policy of giving academies more freedom to make their own decisions—or is that another subject on which she is going back to her old, left-wing, statist ways?

[Rachel Reeves]

The last Labour Government did not give less money to schools in Leeds than they did to schools in Surrey. Is that this Minister’s policy?

[Mr Maude]

Under the last Government, a lot of schools in a lot of places found they were getting a lot less support than they were in other places—funny, that. The fact is that we announced an additional £30 billion of investment in major infrastructure projects across all regions of the UK, and in the Budget we laid out an additional investment of £420 million to stimulate local economic growth.

We have already taken considerable action to achieve strong sustainable and balanced growth that is more evenly shared across the country, but there is a lot more to do. It is not easy, but we have not shirked our responsibility and we will leave no stone unturned to promote a sustainable balance and fair private sector recovery across the UK. First and foremost, that has meant tackling the record deficit that we inherited, ensuring that the UK remains to the greatest extent possible insulated from the storm that undermines our eurozone neighbours. Public sector pay restraint has to play a vital role in that fiscal consolidation. At the same time, by considering the case for local public sector pay, we can ensure that we continue to have high-quality public services across the entire UK and help to support a private sector recovery. I commend the amendment to the House.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 24th May 2011 Commons Chamber

[The Deputy Prime Minister]

We want to reduce the number of people in the reformed House of Lords very dramatically—the draft Bill and White Paper that we published last week suggests 300 Members. Exactly what the cost will be depends, of course, on the proportions of elected and non-elected Members, so it is quite difficult to come up with precise estimates at this stage.

[Rachel Reeves (Leeds West) (Lab)]

Good businesses in all our constituencies are being denied bank lending, and new data show that bank lending to small businesses is £2 billion short of the Government’s targets. When will the Government show some backbone and take robust action on the banks?

[The Deputy Prime Minister]

That comes from a party that let the banks run completely amok, and a party that landed us with that problem in the first place! However, I totally agree with the hon. Lady on the Merlin agreement, which the Government have signed with the banks—it commits the banks to lending targets to businesses generally, and to small and medium-sized enterprises specifically. The agreement is in its very early days, but we have made it unambiguously clear to the banks that they must honour its terms. If they fail to do so, we will not be bound by our side of it either.

Oral Answers to Questions

Rachel Reeves Excerpts

Wednesday 18th May 2011 Commons Chamber

[The Prime Minister]

I will certainly look at all the possible ways of putting the nationalised banks back into the private sector. I personally strongly support the idea of widening share ownership, so we will look carefully at the scheme that the right hon. Gentleman suggests. We also have to make sure that we secure value for money for the taxpayer as we try to fill in the great deep pit of debt that we were left by Labour.

[Rachel Reeves (Leeds West) (Lab)]

Today hundreds of women in their 50s, supported by Age UK, have come to Parliament to protest against unfair changes to their pensions. The coalition agreement says that there will be no increase in women’s state pension age before 2020, yet under the Pensions Bill that increase will start in 2018. Why the U-turn?

[The Prime Minister]

Yet again, here is another reform important for making sure that our pensions system is affordable and sustainable that Labour has completely given up on. What we are doing with pensions is linking them back to earnings—something that was promised repeatedly but never done—and making sure that our pensions system is sustainable for the long term. That is what we are delivering—something never done by Labour.

Oral Answers to Questions

Rachel Reeves Excerpts

Wednesday 2nd March 2011 Commons Chamber

[The Prime Minister]

My hon. Friend makes an extremely good point. I know how difficult it is for motorists, and particularly for small businesses and families, when they are filling up at the pumps and paying more than £1.30 a litre. As we have said, we will look at the fact that extra revenue comes to the Treasury when there is a higher oil price, and will see whether we can share some of the benefit of that with the motorist. That is something that Labour never did in all its time in government, and it ought to be reminded of the fact that it announced four increases in fuel duty last year, three of which were due to come in after the election.

[Rachel Reeves (Leeds West) (Lab)]

The £90 million of cuts to the budget of Leeds city council means that Bramley baths in my constituency will have its hours cut so that school children will not be able to swim there any more. How does that fit with the Government’s ambition for school sports and for the Olympic legacy for Leeds?

[The Prime Minister]

We do want to see a proper legacy come out of the Olympics. That is why we are funding the Olympics properly and why we have made it very clear that the extra money will be made available for school sport. But, if we look at education funding, we can see that funding per pupil is not being reduced. Because of difficult decisions being made elsewhere, which Labour has never supported, we are maintaining per-pupil funding for students throughout our country. That is the right decision, and it is one that the hon. Lady should get behind.

Prisoners’ Right to Vote

Rachel Reeves Excerpts

Tuesday 2nd November 2010 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

Armley jail in my constituency houses 1,128 prisoners, including 55 lifers. What assurance will the Minister give law-abiding citizens in Armley ward in Leeds West that their electorate will not increase by more than 1,000 and that their votes will not be diluted as a result of these changes?

[Mr Harper]

The hon. Lady will know from what I said earlier that we are considering how to implement the Hirst judgment. When we have made those decisions we will announce them to the House, and she will be able to ask those specific questions at that time.