Enterprise bodies to get state funding says Cable

Speaking to the Yorkshire Post, Mr Cable said there is “no question” of the Government introducing regional rates of pay into the public sector, and described the argument set out earlier this year by Treasury officials – that relatively high public sector pay in low-wage areas such as Hull and Bradford is holding back private sector growth – as “not valid” during a time of high unemployment.

In a significant step, York-born Mr Cable revealed the Government now plans to provide state funding for the country’s newly-established network of local enterprise partnerships (LEPs), the business-led strategic bodies set up to replace abolished regional development agencies like Yorkshire Forward.

Mr Cable said a deal has been struck in principle with Communities Secretary Eric Pickles that will see LEPs offered match-funding from Whitehall for every pound they raise themselves. “The Government will support them,” Mr Cable said. “We have made that decision.”

Officials at the Department for Business said later that Mr Cable was setting out a “direction of travel” for the Government, insisting they are still “exploring options” on how to finance LEPs.

Just as important for the regional economy is Mr Cable’s intervention in the row over local pay, which exploded in March when Chancellor George Osborne instructed the Government’s independent review bodies to bring forward proposals to make public sector pay rates “market-led”.

Documents submitted by the Treasury at the time highlighted how nationally-agreed pay deals mean public sector wages are typically higher than those in the private sector in many parts of the UK – with the gap wider in Yorkshire than anywhere else in England.

“Reducing the public sector pay premium would help private businesses, particularly in some sectors, to become more competitive and expand,” the Treasury stated. But the plan provoked a backlash across the North amid warnings that narrowing the gap would inevitably involve freezing public sector pay for many years.

Leeds City Council chief executive Tom Riordan said spending power would be sucked out of the regional economy. Yorkshire’s backbench Conservative MPs privately lobbied Mr Osborne to drop the proposal, and Deputy Prime Minister Nick Clegg pledged he would block any move that might widen the North-South divide.

With a decision due from the Treasury after the summer recess, Mr Cable said the plans will involve nothing more than introducing some “flexibility” for local paymasters. “There is no question of the Government imposing different regional levels of pay – in other words that if you live in Yorkshire you get paid 20 per cent less than in the South East,” he said.

Asked about the argument that relatively high public sector pay is “crowding out” the private sector, Mr Cable said: “There were people arguing that outside of Government. But when you have difficult unemployment conditions, that argument is not valid.”

A spokeswoman in Mr Cable’s department later clarified his remarks on LEP funding, insisting a “range of options” is still on the table. “Offering LEPs further financial support is something the Government is actively considering,” she said.

“Ministers have given a strong steer as to the direction of travel, but details still need to be worked through and we are keen to explore a range of options.”