COMMENT
Rubbishing regional pay
Fenton Coulthurst talks to Helen Kersley, head of the New Economics Foundation (nef) team behind a report that seems to demolish the economic case for regional pay in the public sector.
W
ould a regional pay structure for the public sector cut government spending and help revitalise the private sector across the country?
Not according to a new report by Helen Kersley and colleagues at the New Economic Foundation (nef).
The report, ‘The economic impact of local and regional pay in the public sector’, released in July for the TUC, studied the theoretical and practical basis of the Government’s proposed plans and deemed that of the three central arguments put forward by the Treasury, “none of them stand up to close scrutiny”.
It found little to recommend public sector pay cuts across the country. Talking to PSE, Kersley highlighted problems regarding the social impacts of the proposal and with the standards of the Treasury’s research, plus the fact that in even the most optimistic scenario, UK GDP would suffer nearly £3bn in net losses, the research suggests. This would be due to lower spending by workers affected, lower tax takes, and harm to local economies.
Misconceived assumptions
The Government’s case is centred on three key arguments: that the public sector has a ‘pay premium’ grossly above equivalent jobs in the private sector in some regions; that the private sector is more responsive to local conditions for determining wages; and that the supposedly higher pay in the public sector ‘crowds out’ jobs and investment for private companies.
Kersley and her team said the assumptions behind these arguments were not supported by the facts, and that the language used by proponents is often “mischievous”, particularly concerning pay premiums.
In doing the research, the team tried to clarify the defi nitions of the terms used by the Treasury and found that ‘premium’ was one term that had been warped signifi cantly.
She blamed not just Government ministers and policy-makers, who should know better, but also lamented the fact that the idea of a pay premium had taken hold in
the public imagination and entered common parlance in terms of economic debate.
18 | public sector executive Jul/Aug 12
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