This won’t come to a head until the summer; but rebellion is already in the air among Lib Dem MPs over coalition plans to regionalise public sector pay. Several have told us they believe the idea is “stupid” or “unsound” and “should be resisted” because it could accentuate the north-south divide.
George Osborne has written to six pay bodies to report back by July on how the idea might work; the Tory chancellor believes it could help the economy. (The theory is that if the state offers higher wages in poorer areas then companies have a smaller pool of available talent). Tory MPs – even in the north and south-west – seem to think it’s a great idea. But the Lib Dems fear it could have the reverse effect, causing a “race to the bottom” as companies follow suit and cut their pay to match the public sector.
There are also enormous difficulties in how you implement this idea; people in Downing Street and the Treasury fear a backlash if they immediately cut pay. There are also concerns about freezing pay in poor areas while lifting it in affluent areas. That may leave the much smaller option of only introducing the system for new hires; but even that would result in a two-tier labour market, which would also be controversial.
Here’s a link to our full story this morning.
Jim Pickard
Kiran Stacey