Why regional public sector pay still won't happen

By Matthew Barrett
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I have previously written about why regional public sector pay will not happen. 

My reasoning then was fourfold: 

• The Liberal Democrats, including Nick Clegg, were opposed
• Conservative MPs in poorer areas, such as the North East, had spoken out against the idea
• Marginal Tory seats quite often had majorities far smaller than the number of public sector workers in their seats
• Public opinion was against it, including amongst Tory voters

However, that was mid-June. Since then, there has been some more activity suggesting a) the Government has some willingness to pursue the policy, and b) it is unlikely to succeed.

Matthew Hancock, an MP extremely supportive of the Treasury, appeared on the Today programme yesterday morning. He framed regional pay as giving public sector managers the ability to decide pay for their employees as they see fit. 

There has also been plenty of activity from those opposed to a move towards regional public sector pay, too. The UNISON union commissioned Income Data Services, an independent labour market research organisation, to investigate the Government's policy. IDS have now published their findings, "Crowding out: fact or fiction?" (pdf), and they found three things that undermine the Government's case for regional public sector pay.

Firstly, the Government's argument for regional pay rests on their assertion that private sector pay varies by region, and therefore public sector pay should do the same in order to avoid some regions with weak private sector employment being "crowded out" by the public sector. However, IDS found that private sector pay doesn’t show significant variations across regions. Therefore, the Government would simply be unfairly disadvantaging the public sector, rather than bringing public and private sectors in line with each other.

Secondly, IDS found that, instead of the public sector "crowding out" private sector employment in some regions, the public sector simply reacts to the local population: the number of nurses, local government workers, teachers and doctors is a reflection of how many people live in a particular area.

Finally, IDS found that job creation in the private sector is not affected by public sector pay in the regions. The report says:

"For this project IDS has looked at examples of job creation and job losses in the North East, and also to a lesser extent in the South West, over the course of the first half of 2012. In no cases have we found job creation in either region to be inhibited by public sector pay level. It is just not on the radar."

All of this is bound to reduce support on the Tory backbenches from those marginal MPs who have yet to state their opposition to the policy publicly.

Since I last wrote about it, Nick Clegg has reaffirmed his opposition to regional pay, saying he is "adamantly against anything which makes the North-South divide worse". Unions are making trouble over plans to reduce pay for NHS staff in the South West. Tory MPs in the North East have continued their opposition. Guy Opperman, the MP for Hexham, wrote for us on Saturday that the Conservatives should drop regional pay, and pointed out:

"It's also worth remembering that public sector workers make up an important part of any majority winning coalition of voters. In one IPSOS MORI poll in the run up to the General Election they found that 32 per cent would vote Conservative, 29 per cent for Labour and 19 per cent for the Lib Dems. We must respect the trust those public sector workers put in our party."

Despite renewed interest from the Treasury, nothing has changed to suggest that regional public sector pay will be passed into law without a Coalition split, a Conservative split, public opposition and plenty of strikes. It still won't happen.