Osborne ready to abolish national pay bargaining

By Tim Montgomerie
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If you work in the public sector in Wales you are likely to earn an average 18% more than if you work in the private sector (and that's before pension privileges and job security is factored in). This makes it hard for private sector businesses in the principality to attract the most talented staff.

If you work in the public sector in the South East of England you often can't afford a decent home. This means schools and hospitals in the region can struggle to attract enough 'key workers'.

The reason for these tensions is national public sector pay scales. A doctor in Swansea gets paid the same money as a doctor in Swanage or Slough or Surbiton - even though the cost of living might be very different.

In last year's Autumn Statement George Osborne announced a review of national pay bargaining and it appears from this morning's press (see the FT (£)) that he plans to abolish national pay scales in Wednesday's Budgets. He'll introduce gradual change by freezing or curtailing public sector pay (perhaps only for new recruits) in less prosperous regions until some sort of public/private equilibrium is restored. The Government believes pay flexibility will produce more willingness among workers to move between Britain's regions but ther system could also become quite bureaucratic if pay scales are not properly devolved to local hospitals and public sector managers.

If this makes economic sense (and it certainly does) it's politically dangerous. The unions and Labour will easily caricature this policy as an attack on the North. They will accuse the Tories of taking money out of Britain's less prosperous regions. Public sector workers in the North already facing a wage freeze because of the deficit reduction package will be scared with warnings that their earnings may be frozen for a decade. Public sector workers facing this freeze won't quickly vote Conservative while private sector workers who benefit will be less likely to attribute their good fortune to the Coalition.

The Tory MP for Lancaster and Fleetwood, Eric Ollerenshaw, appears worried about this policy. The Party Chairman's PPS and author of a new pamphlet on the North-South divide tells this morning's Daily Mail that "the Government will need to make its case carefully in the face of arguments that such a policy would bring about a brain drain from the North, remove money from the Northern economy and even institutionalise the North-South divide."

The Government certainly needs to proceed carefully. It is not clear that the ground for this announcement has been adequately "pitch-rolled" - to use one of our cricketing Prime Minister's favourite expressions. The Government should only present solutions to problems that voters already recognise as real.