Localising, or regionalising, public sector pay has been a long dream of HM Treasury. But there are reasons it has never been realised, reasons that still militate against it happening in practice, whatever Mr Osborne decrees from the centre.
We already have evidence of this – NHS Foundation Trusts have the power to vary pay rates but have not made much use of it, for reasons that are obvious to anyone who’s actually worked in real organisations.
So let’s list just a few of them:
– Transactions costs: the effort involved in negotiating local or regional pay deals is substantial. Just multiply the staff time of Employers and Unions engaged in negotiations, every year, by 10 English Regions, or 300 odd local authority areas, and you start to get some idea of the cost of decentralised pay bargaining.
– Employers tend to want to simplify pay arrangements – which is why NHS Foundation Trusts that already have the power to vary pay locally have largely stuck to national agreements. It’s easier and the marginal benefits of renegotiating locally aren’t worth the effort.
– Equalities legislation means careful analysis of the impact of pay changes to avoid costly legal disputes over equal pay. Decentralised pay structures means repeating such analysis for every
– Labour-market flexibility: public sector workers, especially as they have become more professionalised, have markedly increased ‘travel to work’ areas and readiness to relocate. Regional or localised pay will reduce this flexibility.
– Specifically for the Civil Service, since 2004 the government has supposedly been trying to reverse the over-concentration of CS numbers in London and the SE. With reduced pay in other Regions, how willing will staff be to relocate?
– Competition for scarce staff could easily start to drive up some salaries in some areas, rather than down (this has already happened in the past for people like IT professionals).
– Reducing public sector pay for the rest of England,whilst retaining the same levels in London and the SE, will have political consequences. It will be seen by many, I suspect including local private sector retailers and others who will lose out as even more money is taken out of regional economies, as yet more London-centric policy making.
Mr Osborne can announce whatever he likes in the Budget, but I suspect these barriers, that have kept national pay structures in place for decades, will prove a lot easier to demolish in rhetoric than they will be in practice.