NATIONAL pay deals for the public sector are set to be torn up in a bid to revive the economy, sparking fears that Yorkshire workers could be hard hit.
Business leaders and Tory MPs welcomed Chancellor George Osborne’s announcement and said it could give the region a “jobs lifeline” by allowing private firms – who say they struggle to attract staff because of higher state-funded wages – to compete in areas where the cost of living is lower.
But unions and Labour MPs claimed it would push down the wages of nurses, teachers and council workers and extend the North-South pay divide.
The politically explosive proposal, which could come into force within two years, was unveiled in Mr Osborne’s Autumn Statement which painted a gloomy outlook for the UK economy.
The economy is now expected to grow by just 0.9 per cent this year and 0.7 per cent next year according to the independent Office for Budget Responsibility (OBR), forcing the Chancellor to borrow an extra £111bn before the next election and see unemployment rise by an extra 200,000. Public sector job losses are expected to rise from 400,000 to 710,000 by 2017.
Mr Osborne said that the OBR blamed the sovereign debt crisis in the eurozone for the UK’s sluggish growth and admitted that recession would be “hard to avoid” if the single currency collapses.
In an effort to tackle the budget deficit, Mr Osborne announced another two years of pay restraint for public workers – with wage increases averaging one per cent when a current salary freeze ends – and the increase in the state pension age to 67 will be brought forward by almost a decade.
But there was some relief for motorists and rail users with a 3p fuel duty rise in January axed and train fare increases pegged at inflation plus one per cent.
In a move to create jobs, he also announced a £100m package to kick-start eight long-awaited transport projects in the region, including the £22m Access York Park and Ride scheme, improvements worth £10m to the A164 Humber Bridge to Beverley road and two new railway stations at Kirkstall Forge, Leeds, and Apperley Bridge, Bradford, costing £17m.
The projects will be taken forward alongside the £290m electrification of the Transpennine rail route and the £150m scheme to cut tolls on the Humber Bridge from £3 to £1.50 – as called for by the Yorkshire Post Give us a Fair Deal campaign. The Regional Growth Fund is also being expanded in another victory.
But Mr Osborne faces a political backlash after ordering independent pay review bodies to report by next summer on how to make public sector pay “more responsive to local labour markets” – potentially ending the current system where workers like teachers and nurses are generally paid the same across the country.
Treasury sources denied it was designed to cut pay or save money – insisting the overall wage bill would stay the same – and said they would “not envisage” people getting pay cuts. Academies and GP practices are already able to negotiate their own deals.
Official figures show the average wage in Yorkshire is £19,720 – nearly £2,000 below the English average. Experts claim public sector wages in some areas are 10 per cent higher than in the private sector, making it harder for private firms to attract quality staff and therefore holding back the economy.
Iain Hasdell, senior partner at KPMG in Leeds, said the move could “throw Yorkshire a jobs lifeline”, adding: “The opportunity to localise pay to reflect labour market conditions may allow this region – and others outside the South East – to counteract some of the jobs challenge.
“Public sector pay can exceed that in the private sector by 10 per cent, forming a pay gap which, if eliminated, could see the region take competitive advantage, not only retaining more jobs locally but also facilitating more moves out of Whitehall, adding much-needed jobs to the local economy.”
The Institute of Directors also backed the “potentially radical” move and Skipton and Ripon MP Julian Smith said it was “well worth looking at”.
But TUC General Secretary Brendan Barber said: “The Autumn Statement was bad for the North. Not content with cutting public sector workers’ pay by 16 per cent in real terms over the next few years, the Chancellor’s threat to rip up of national pay agreements could squeeze wages in Yorkshire even more.”
Penistone and Stocksbridge MP Angela Smith said: “If we’re serious about addressing the economic difficulties that face Yorkshire and the Humber, then the last thing we need to be doing is widening the pay gap between Yorkshire and the South East.”