John O’Farrell argues that regional pay will drive down demand and prolong the recession.
Sammy Wilson does not always see eye to eye with the unions but we are at complete agreement that the Chancellor George Osborne’s latest wheeze is “pernicious”. The Chancellor has pre-empted the study being carried out by the UK’s independent pay review bodies and announced in the Budget that he wanted to make regional public sector pay more “responsive” to private sector wages, with some government departments given the option to move to regional pay structures for civil servants when the current pay freeze ends.
Depending on which set of statistics one chooses, there is a considerable ‘pay gap’ between the public and private sectors in Northern Ireland, with those who favour hammering public servants citing 41 per cent. It is only fair, they argue, that this is reduced so that the private sector can ‘compete’ for skilled workers and anyway, it is ‘unfair’ on workers in London.
There are several levels of fatuousness with this argument. The first is that public sector wages are not high by UK standards, thanks to national pay bargaining. This saves resources by centralising negotiations carried out by professionals on both sides rather than local talks with the attendant risks of disputes or subsequent equality challenges. It is simply fairer that the same pay operates for the same job; that is also taken into account by ‘London weighting’, which ensures that high housing costs are accounted for and that each teacher or nurse has roughly the same purchasing power.
National pay bargaining is the practice of most large private companies anyway, so the notion that local market conditions dictate wages is extremely bogus. What local market conditions tell us about Northern Ireland is that the private sector is dominated by small businesses that pay close to the minimum wage. The real pay gap which is sucking demand from the economy is the 20 per cent gulf between the private sector here and the private sector in Great Britain. That is a much more meaningful comparison than glancing at the medium wage and opining that a fully trained police officer is the direct public sector equivalent to a nightclub bouncer.
The basic reason why the ‘average’ public servant is better paid than the ‘average’ private sector worker is that they do different jobs. The public sector employs far more graduates and when there is a recruitment freeze (as there has been for the past three years), it means that those graduates who would have found employment in education or health or the Civil Service are instead scrambling for jobs which ordinarily have gone to the less qualified in sectors such as private sector services or retail.
We see the effects of this currently. We have a growing problem of youth unemployment which is concentrated on the less qualified who are unable to get ‘starter jobs’ and we have a parallel problem of a ‘brain drain’ of graduates taking the boat or plane abroad.
A public sector wage premium also means that education and health posts are highly desirable and places on specialist degree courses are very competitive. A place in a teaching college in Northern Ireland requires three A-levels at grade A, far higher than in London where well-remunerated opportunities exists for those skilled with numbers or science.
Finally, freezing public sector wages to force them down to the meagre level of the private sector medium will take around 20 years. Already public servants have three years of stalled salaries and face a further freeze for two more years. This amounts to a 16 per cent cut when inflation is taken into account.
In the meantime, how is this mean-spirited plot going to help the private sector? By sucking yet more demand from the economy, the local recession will simply go on and on. This is madness, and more MPs and MLAs should join with the Finance Minister in denouncing it.
What does the very existence of this debate say about the Westminster Government and its cheerleaders and their attitude to public servants? This is a party and ideology in hock to the money and ideas of hedge funders, privateers and tax dodgers. There are bigger things at stake here than the deficit.
