News analysis Unions and CBI split on regional pay packages

17 Apr 03
Gordon Brown has the reputation of a chancellor who likes to spring surprises when he steps up to the dispatch box to deliver his Budget statement. But this year the surprise came at the expense of the public sector unions and it was not one they w

18 April 2003

Gordon Brown has the reputation of a chancellor who likes to spring surprises when he steps up to the dispatch box to deliver his Budget statement.

But this year the surprise came at the expense of the public sector unions – and it was not one they welcomed.

Brown told MPs on April 9 that, in future: 'Remits for pay review bodies and for public sector workers, including the civil service, will include a stronger local and regional dimension.'

Regional price indexes would be compiled for the first time to show inflation across Britain, he added.

Unison, the GMB and the T&G were clearly caught unawares by apparent indications of a move towards regional pay settlements. Embarrassingly, the three unions had pre-booked a full-page advertisement in a national newspaper, prominent amid the post-Budget day coverage, lauding the chancellor's statement.

'Investing in our services. Investing in our futures. A Budget to keep public services public,' it cheered. 'And the wages bill down,' might have been an illuminating addendum. For this is what the unions, at least, suspect is the motivation for Brown's announcement.

Naturally, the Treasury denies it. A spokesman says it is merely an attempt to inject 'flexibility' into pay talks to take greater account of labour market conditions.

'In the public sector, there will be a floor that is nationally agreed, but there's no reason why there can't be regional enhancements on top of that,' he adds. 'The chancellor is absolutely clear that national pay bargaining will continue.'

Dan Corry, executive director of the New Local Government Network, backs this explanation. His think-tank is credited with formulating the philosophy of 'new localism', said to be inspiring Treasury thinking, and he believes pay flexibility is a pragmatic response to a complex issue.

'The worry in the Treasury is: "How can we do something about recruitment and retention in the Southeast, without having to pay extra all over the country?",' he says. 'I don't think they are motivated by a desire to smash national pay bargaining.'

But Public Finance has spoken to one union source who is in no doubt that Brown's real intention is to mollify the private firms the government is trying to entice into the classroom and on to the hospital ward. 'This is a sop to the CBI [Confederation of British Industry], because it lost out badly on the two-tier workforce code,' the source says.

The unions were triumphant when the code, published in February, stipulated that the pay and conditions of post-privatisation staff must be 'no less favourable' than that of their outsourced colleagues. The CBI's favoured phrase, 'broadly comparable', was missing from the final draft.

Publicly, the unions are not linking the two issues. But they are nevertheless extremely suspicious of Brown's motives.

Heather Wakefield, Unison's national organiser for local government, gives short shrift to the argument that public sector pay settlements need to be more flexible to tackle shortages. 'This is about trying to push down wage levels in the public sector; it is not about solving the recruitment and retention issue,' she says.

'There is already flexibility; there are wide variations in pay across England, Wales and Northern Ireland. This notion that we have monolithic pay structures with no flexibility is a complete nonsense.'

The CBI, by contrast, has greeted Brown's announcement with enthusiasm. But Francis Ingham, senior local and regional government policy adviser, says his organisation would not countenance an overall increase in spending on salaries.

'We don't yet have a particularly clear view of what the chancellor intends,' he adds. 'But it might lead to some people being paid more in some areas of the country than in others. We would not be willing to accept a higher public sector pay bill and would expect this to be funded by efficiency savings.'

And here lies the rub. The 'national minimum plus top-ups' that the Treasury apparently envisions necessarily implies an increase in the total wages bill.

Meanwhile, the CBI's desire to redistribute spending to target areas with recruitment problems, implying cuts elsewhere, is sure to provoke the ire of the unions.

Whichever course the chancellor steers, it would seem there are troubled waters ahead.


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