National pay bargaining ‘bad for Britain’, academics claim

18 Sep 12
Twenty-five economists have urged ministers to ditch national pay bargaining in the public sector, saying it is ‘bad for Britain’.
By Vivienne Russell | 19 September 2012

Twenty-five economists have urged ministers to ditch national pay bargaining in the public sector, saying it is ‘bad for Britain’.


In a letter published in the Times today, the group of 25 said radical reform of public sector pay arrangements would improve public services and make it easier for private sector firms to recruit and expand.

The letter proposes keeping the total public sector pay bill for each region the same, while allowing individual wage negotiation.

‘Local wages would then be determined locally, with any savings used to enhance local service,’ the letter states.

‘This proposal is in keeping with the government’s localism agenda, and makes economic rebalancing in the regions much more likely to be successful.’

The signatories include Andrew Oswald, professor of economics at Warwick University, who said the public sector pay system needed to ‘face up to reality’.

‘A pound note in one part of the UK does not buy the same as in another part… It might be thought “fair” to have lower real wages for teachers and nurses in the prosperous south of England, but it is hard to see why it is fair on pupils and patients if key public workers are reluctant to take jobs in the south.’

Another signatory, Alison Wolf, professor of public sector management at King’s College London, said: ‘The public sector should be free to respond to local circumstances and local skill shortages. Individually negotiated contracts would improve services, create more jobs and encourage sustainable private sector-led economic growth.’

In last year’s Autumn Statement, Chancellor George Osborne asked the independent pay review bodies to ‘consider how public sector pay can be made more responsive to local labour markets’. Their reports are expected some time this autumn.

However, the idea been opposed by trade unions, while the devolved administrations in Scotland and Wales have also expressed concern. Shadow Chancellor Ed Balls has called the idea ‘quite unfair’.

Liberal Democrat MP John Pugh recently told Public Finance that any move to drive through regional pay could prompt ministerial resignations.

The full list of signatories is:

1.    David Newbery, emeritus professor of economics, Cambridge University
2.    Tim Besley, Kuwait professor of economics and political science, London School of Economics       
3.    Oriana Bandiera, professor of economics, London School of Economics      
4.    Mark Schankerman, professor of economics, London School of Economics 
5.    Bruce Lyons, professor of economics, University of East Anglia         
6.    John Van Reenen, professor of economics and director of the Centre for Economic Performance, London School of Economics              
7.    Peter Sinclair, professor of economics, University of Birmingham    
8.    John Maloney, associate professor of economics, University of Exeter         
9.    Peter Howells, professor of economics, University of the West of England    
10.    Mark Harrison, professor of economics, University of Warwick         
11.    Alison Wolf, Sir Roy Griffiths professor of public sector management, King's College London            
12.    Andrew Oswald, professor of economics, University of Warwick      
13.    Kent Matthews, professor of economics, Cardiff University
14.    Kul Luintel, professor of economics, Cardiff University          
15.    Maitreesh Ghatak, professor of economics, London School of Economics    
16.    Professor Gianni De Fraja, head of department, University of Leicester
17.    Robert Rothschild, professor of economics, Lancaster University    
18.    Professor Keith Pilbeam, director of business economics, City University London        
19.    Glauco De Vita, professor of economics, Oxford Brookes University        
20.    David Collie, professor of economics, Cardiff University       
21.    Amrita Dhillon, professor of economics, University of Warwick        
22.    David Higgins, professor of business history, University of York        
23.    Ronald Macdonald, professor - Adam Smith chair of political economy, University of Glasgow        
24.    Laurence Copeland, professor of economics, Coventry University
25.    Stephen Wright, professor of economics, Birkbeck College


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