Treasury abandons regional pay

George Osborne announced yesterday that national pay bargaining will continue in the NHS, civil service and prisons service, after three independent pay review bodies all rejected his plan to introduce localised pay deals.

Teachers will face a shake-up, however, with new plans for perfomance-related pay to be unveiled by Education Secretary Michael Gove in the new year.

The proposal for regional pay had met widespread opposition from unions and MPs of all parties in lower-wage areas, amid fears it would suck money out of struggling local economies.

Deputy Prime Minister Nick Clegg, who spoke out against the plan in the Spring, hailed the decision and said the idea will not be revived before the next election.

“I can confirm the Government will not impose new regional pay rates or zones from the centre – and we won’t be returning to regional pay during this Parliament,” the Liberal Democrat leader told the Yorkshire Post.

“I want public sector workers in Yorkshire to rest assured: what matters is how hard you work, not where you work.”

“I have been clear I would not support a move that either short-changed public sector workers, or exacerbated the North/South divide at such a difficult time.”

The regional pay plan was first unveiled by the Chancellor in last year’s Autumn Statement. In March he asked the independent boards which review pay in different parts of the public sector to come up with ways of reforming the system.

The Treasury had claimed that national pay bargaining meant nurses and teachers in lower-wage areas such as Hull and Bradford were being overpaid in relation to their private sector counterparts, so “crowding out” local firms.

But that concept was rejected by the independent pay bodies in reports published yesterday. The NHS review body said it was “struck by the universal lack of support for a move to full local pay bargaining in the NHS”.

The Treasury denied it had performed a U-turn, insisting it had always planned to abide by the decision of the pay review bodies.

Treasury Minister David Gauke said: “We asked the pay review bodies what they thought the right thing was for their particular sectors, and they came back based on a proper study. We fully accept those conclusions.”

Unions were jubilant, having battled the proposals fiercely. Dr Peter Carter, general secretary of the Royal College of Nursing (RCN), said: “Nurses will welcome the Chancellor’s commitment to national pay arrangements. The RCN has long been arguing that the pitfalls of regional pay are numerous, and represent nothing more than an attack on nursing staff.”

Rachel Reeves, Labour MP for Leeds West and Shadow Chief Secretary to the Treasury, also welcomed the decision, but warned: “George Osborne will continue to look into changes in the pay framework for the NHS.

“The campaign against regional pay must continue, and we remain vigilant about the Government introducing the measures by stealth.’

And unions criticised the plan to pay teachers related to their performance in the future. TUC General Secretary Brendan Barber said: “Today the Government has given the green light to all schools to set the salaries of their teachers.

“This is a harsh decision. This kind of individualised pay will lead to division within staff rooms, as teacher is set against teacher.”