11 April 2003
Gordon Brown opened a new front in the government's ongoing battles with trade unions this week when he used his Budget statement to indicate a move towards regional pay settlements.
The chancellor, addressing a packed House of Commons on April 9, said there was a need to 'recognise local and regional conditions in pay', such as extra staffing costs in London.
He announced the establishment of regional price indexes to measure inflation rates in different parts of the country. More significantly, he made clear that regional economic conditions would in future be factored into public sector pay settlements.
'Remits for pay review bodies and for public sector workers, including the civil service, will include a stronger local and regional dimension,' he told MPs.
The news drew immediate fire from public sector unions, who were apparently caught unawares by the announcement. Jack Dromey, the T&G's national organiser, told Public Finance that the union was staunchly opposed to any moves towards local pay talks.
'Regional pay bargaining would be a recipe for chaos and conflict, impoverishing most of the UK from Cornwall to Cumbria,' he said. 'National pay bargaining works.'
Unison general secretary Dave Prentis agreed. 'We would not be happy with a move towards regional pay and will be watching developments closely. Extra pay in one part of the country cannot be at the expense of others,' he said.
By contrast, CBI director general Digby Jones, whose organisation represents many firms involved in public service provision, gave the news a rapturous welcome.
'It is a huge step forward to allow regional public sector pay awards to reflect differing regional circumstances and inflation rates,' he said. 'The chancellor has demonstrated his commitment to drive through this much-needed public sector reform.'
Brown also announced a review, led by Birmingham University's professor of public policy Sir Michael Lyons, to consider moving up to 20,000 civil service jobs from London out to the regions. All departments have been told to draw up plans and Lyons will advise which organisations might be suitable for relocation.
The regions will also benefit from measures to boost local economies. The 2,000 most deprived areas, designated enterprise areas, will have a fast-track planning regime; all stamp duty abolished; enterprise advisers in local schools; and enhanced capital allowances to stimulate investment.
Brown also confirmed that, from April 2005, local authorities would be allowed to keep a proportion of the commercial rates raised by attracting new businesses to their areas. Details of the measure, which will be introduced as an amendment to the Local Government Bill currently before Parliament, will be outlined during the Bill's committee stage in the autumn.
The Local Government Association has welcomed the measure. David Maddison, local taxation project officer, said it was a significant development. 'We don't know how much income it is likely to provide, but it will help councils build a relationship with their business communities,' he added.
As widely predicted, Brown reduced his economic growth forecast from 2.5%–3% to 2%–2.5% for 2003/04. He confirmed that he would instead increase public borrowing to £27bn to protect the programme of investment in public services outlined in last year's Spending Review.
PFapr2003
