Christopher Pincher MP: National pay bargaining is a throwback to the collectivist 1970s - and it should go

Christopher Pincher is the Member of Parliament for Tamworth. Follow Christopher on Twitter.

The Blogosphere and Twittersphere are awash with rumour of what is in the budget. T’was ever thus of course. Last year I wrote such an article on “what the Chancellor should do” here on ConHome. Nor is it new for the opponents of potential measures to get their retaliation in well before the Chancellor gets to his feet in the House of Commons.

This year the supporters of national pay bargaining have been active more than most. The PCS union has already taken to cyberspace to condemn suggestions NPB could be abolished. Regional economies will be ruined they cry. There are too many pay deals for it to be feasible they claim. I know because I have been on the receiving end of their tweets.

It is fair rule of thumb that when the unions, and you have to admire them for their speed of action, announce their unswerving antipathy to a deregulatory measure, you know it is the right thing to do. Ending a collectivist pay policy redolent of the 1970s is the right thing to do.

Of course the unions will never admit it but national pay bargaining in the public sector hurts the taxpayer, hurts the private sector especially small businesses and start-ups and, ultimately, hurts the job seeker too. The TUC bosses, wedded to 1940s monopoly union model theory, stopped Gordon Brown investigating the opportunities of localising pay bargaining in 2003. Nearly a decade later they are trying to do so again. They must not be allowed to succeed.

Today in the West Midlands, the average price of a house is £178,000. In the South East the average is £284,000. A pint of beer which costs less than £3 in the Black Country can approach £4 in pubs just outside London. In Tamworth one adult cinema ticket is priced at £7.70. In the South East that ticket will cost over £10. The disparity is even greater between the North East and London where a cinema trip will cost either £7.25 or £11.10 depending on whether the film you want to see is showing in Newcastle or New Cross. The same is true of rents, food and clothes in both high street shops and national chain stores.

As I repeat from my previous article, the point is simple: it is much cheaper to live in some parts of the country than in others. A public sector worker in the North is likely to have an appreciably higher disposable income than one in the South. The private sector recognises this and prices the local labour markets accordingly. Yet for millions of public sector workers, their salaries will be the same whether they work in Sevenoaks or Sheffield, Sidmouth or Stevenage. Their nationally controlled buying power inflates wage rates and prices small businesses out of competition for recruits. That in turn drives an over-reliance on the public sector to provide local jobs – and an over-reliance on the taxpayer to fund them. National pay bargaining skews local labour markets.

By introducing a truly local negotiating structure, wage rates especially in economically depressed communities of the country will be sufficiently competitive to encourage new private jobs well beyond the scope of the public sector. That will drive private wealth creation in parts of our country which currently serve only as recipients of public wealth. These are the towns and cities with the most people trapped in poverty and dependency. They are the people who will benefit most from a more flexible wages regime. It will also deliver a significant saving for the tax payer as pay accounts for up to 30% of the public sector bill. That saving can be used to reduce our deficit, cut taxes or spent on value for money capital projects.

Labour and their paymasters seem to think there is something progressive about national pay bargaining and a slew of anti employment “protections”. But as Alan Greenspan once observed of attitudes in Europe, there is nothing progressive about 10% unemployment because too many rules and a rigid pay structure conspire to choke off job creation. If faced with the choice of a job with a lower wage than in a more expensive part of the country or no job at all, I think the majority of active job seekers will opt for work and opportunity over welfare and dependency.

And as Labour now seems interested in the far more contentious issue of regional variations in benefit caps, they should logically consider the attraction of regional differences in our public pay structure. As the Chancellor puts the finishing touches to his speech on Wednesday he will doubtless be tempted to take out his pen and strike out certain sentences. Assuming the rumours are true and the speech does herald the end of national pay bargaining, the Chancellor must ignore the union chorus urging him to wield his red pen. Instead, and for the future good of our regional economies, he must write local pay bargaining into the Red Book.