28 November 2003
Chancellor Gordon Brown this week set in motion the roll-out of regional wage settlements across the public services – but insisted that changes must be made within existing national pay frameworks.
A Treasury guidance note, distributed to Whitehall departments and obtained by Public Finance, makes clear Brown's decision to avoid full-blown 'regionalism' in future pay settlements, and has helped balance the conflicting views of public service employers and trade unions.
The regional flexibilities it does encourage, however, are likely to boost initiatives to ease recruitment and retention problems in areas such as London and the Southeast, where public sector pay is often eroded by the high cost of living.
Employers, business groups and trade unions all welcomed Brown's approach. That included the CBI business lobby, which has long argued for additional local labour market flexibility, claiming that strict national 'spines' have hindered the quality of public service provision.
But John Williams, CBI public services group director, warned: '[We] will want to see evidence that the chancellor is delivering on his aspirations over the coming months.'
The guidance acknowledges the CBI view – which is shared by, among others, the Employers' Organisation for local government – in arguing that 'flexibility in pay is an essential element of the UK economy's ability to achieve high growth and high employment'.
It asks government bodies to collect information on vacancies and recruitment and retention patterns and to consider whether their employment packages are 'sufficient or excessive', so that extra regional variations can be introduced from 2004.
But Brown states: 'There is significant room within the existing national bargaining frameworks to increase the extent to which differentiated pay is used.'
That line has been crucial in maintaining the support of trade unions, who feared that full-blown regional initiatives would lead to wage freezes, unnecessary competition and the migration of scarce resources to 'cheap' areas of the UK.
A Unison spokeswoman said: 'We support the Treasury's line that devolving pay decisions to local hospitals, for example, would produce regional variations for no good reason.'
Government plans to redeploy thousands of Whitehall-based civil servants to the regions will also benefit from the new plans. But Sir Michael Lyons, chair of the review that recommended the policy to cut costs and boost regional economies, this week told PF he was 'still awaiting detailed action plans from many departments'.
Lyons is reportedly unhappy with the slow response from Whitehall. He wrote to departmental managers in September asking for clearer figures.
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