Tory guru calls for public sector pay cuts

Paying teachers and nurses the same whether they work in Surrey or Doncaster is holding back the private sector in parts of Yorkshire, according to Policy Exchange director Neil O’Brien.

Critics of the system claim poorer areas suffer in particular because inflated public wages made it difficult for private firms to attract quality staff.

Mr O’Brien admitted public sector unions would fight the change “tooth and nail” but claimed scrapping national pay bargaining would not be an attempt to “squeeze people’s pay”. He said it was an issue of “fairness” allowing wages to be higher where the cost of living is higher.

The idea has won support among some Tory MPs but trade unions accused Mr O’Brien of “axe grinding” and questioned the claim that it would help the Yorkshire economy.

The coalition Government has introduced a string of measures aimed at boosting economies outside London and the South East which Mr O’Brien described as a good start but said a lot more needed to be put in place.

The Yorkshire Post’s Give us a Fair Deal campaign has highlighted some of the problems in the Government’s drive to close the North-South divide.

Overhauling planning laws, giving greater priority to transport improvements and tackling welfare dependency could all improve the fortunes of the North, according to Mr O’Brien, whose think-tank is seen as close to the Conservatives.

But arguably his most controversial suggestion is scrapping national pay bargaining.

Mr O’Brien said the current system is “unfair and inefficient” and means that where the cost of living is low people are effectively being paid too much.

By “paying over the odds” the public sector inflates wages – taking away a competitive advantage which would otherwise encourage private businesses to set up outside the South East.

“This means the private sector is smaller than it otherwise would be, and these regions become more dependent on the public sector,” he said.

Moving to local pay bargaining would help to revive the private sector in the North and help to rebalance the economy, he said

The idea has been floated before and local deals can already by struck in academies and free schools, but wholesale change of the existing system would be fiercely opposed by the unions. Mr O’Brien pointed to Sweden as an example of where the national system has been scrapped and wages are set locally, and he claimed it has been successful.

Asked whether the idea was simply a way to cut the pay of thousands of workers, Mr O’Brien, who was brought up in Huddersfield, said: “I don’t think I’d advocate this as a way of trying to squeeze people’s pay. You’re trying to tailor the rate of pay much more to a local area. Isn’t it funny you’ve got London weighting but there’s no Leeds weighting.”

Tim Roache, regional secretary for the GMB in Yorkshire and the Humber, rejected the idea that it could boost the region’s economy as rubbish and said: “Neil O’Brien is axe grinding and he knows it.

“How taking money away from the minority of Yorkshire workers covered by national agreements helps Yorkshire’s economy he needs to spell out in detail.”

However, Shipley Tory MP Philip Davies said he was “totally against” national pay bargaining.

Private quarter gets more cash

Workers in private firms received a median pay rise of 2.6 per cent in recent months, while those in the public sector received no increase, revealing a “clear gap” between the two groups of employees, figures show.

An analysis of 57 settlements covering 1.8 million workers, by Incomes Data Services revealed that the biggest increases were in manufacturing and production firms. Some lower-paid public sector workers received small “protection” increases.