A group of Conservative MPs from across Yorkshire held a private meeting with the Chancellor to raise serious concerns about his plan to introduce local pay into the public sector, amid fears it would leave the region struggling to recruit high-quality workers while draining spending power from its own economy.
One local Tory backbencher told the Yorkshire Post he believes George Osborne’s plan is already a “dead duck”, with discontent among Northern-based Conservatives combining with opposition from senior Liberal Democrats over fears public sector pay would have to be held down for years in low-wage areas.
He said Conservative MPs from across this region made clear their dismay in a private meeting with Mr Osborne last week.
Labour held an Opposition Day debate yesterday to air its own concerns, with Shadow Chief Secretary to the Treasury Rachel Reeves warning that freezing public sector pay for just a single additional year – rather than proceeding with the one per cent pay rise planned – would strip £130m from the Yorkshire economy.
“Imagine the impact on the regional economies,” the Leeds West MP said. “Does the Minister really think this will contribute to economic rebalancing?”
There were suggestions this week that the Government is preparing the ground for a U-turn. On Monday a Downing Street spokeswoman said that “things won’t change” unless “strong evidence” is produced to support the case for ending national pay deals.
The Treasury has repeatedly insisted local pay bargaining is needed to close the gap between public and private sector pay rates in areas such as Hull and Doncaster, which it believes makes it difficult for firms to recruit staff.
But Ms Reeves told the Commons this could only be achieved through years of public sector pay freezes in low-wage areas.
“If the Government says its starting point are these (pay) differentials, it can’t blame people for concluding its ultimate aim is a reduction in the relative pay of public service workers of 10 per cent or more in some parts of the country,” she said.
“Achieving this result would mean the current public sector pay freeze would have to continue for at least another decade.
“No wonder people think this is a deliberate attack on public workers and the parts of this country that have already been hit hardest by recession and austerity.”
Unions have described the proposal as “electoral suicide” for the Government amid mounting opposition in low-wage areas.
Deputy Prime Minister Nick Clegg has already fired his own warning shot to the Treasury, pledging he will not approve any policy which further exacerbates the North-South divide.
Last month Leeds City Council’s chief executive Tom Riordan added his voice to the chorus of disapproval, saying local pay deals would penalise public sector workers while taking money out of the regional economy.
In yesterday’s debate, Brigg and Goole Tory Andrew Percy was among a number of the MPs on the Government’s own benches to speak out against the plan, warning there is already difficulty recruiting NHS staff and teachers across East Yorkshire.
“The reality is we can’t get some public sector workers to come to our region,” he said. “How we’d do that if we paid them even less is beyond me.”
Treasury Minister Chloe Smith insisted “no final decisions have been taken” and that the Government would wait for reports from its independent pay review bodies before deciding how to proceed.
But Cabinet Office Minister Francis Maude made it clear he believes private employers are deciding not to take on staff because bosses cannot pay the wages offered by the public sector – so crowding out enterprise and holding back a private sector-led recovery.