As part of the Budget run-up, on Friday Britain’s labour movement was convulsed at the thought of the latest Osborne proposal: that national public sector pay rates might be scrapped.
But, before we join the voices of the major trade unions and the TUC who are, understandably, trying to look out for their own interest group, as a party whose interests are not always identical to those of our union colleagues, it might behove us to take a few minutes to take a step back.
Now, while no-one would suggest we should be adopting the Tory Budget wholesale, smart opposition is about determining which bits to oppose. A regional bargaining system would likely increase some pay-rates, as well as decreasing (or failing to increase) others.
And it is surely difficult to argue that the current, entirely inflexible system of fixed national pay rates, which was put in place decades ago in a corporatist state era, is fit for purpose.
First, as the Treasury points out, there are absurd variations depending on where you live. In some places pay rates can be artificially up to 18% higher than their private sector equivalents. And furthermore, applying the only current regional exception to the national system, the addition of London weighting, the system even then visibly fails to attract, for example, enough teachers to schools in inner London because many cannot afford to live there. So some people are still not paid enough. Result: poor levels of public service.
Second, the obvious corollary is that, at the same time, others are overpaid for where they live. As the government points out, the overpayment of public sector staff discourages the private sector from starting up in some areas, meaning that some parts of the country become “public sector ghettoes” where the private sector is squeezed out because it doesn’t want to employ staff at an above-market wage. Result: private sector under-investment.
Ironic, really, because PCS’ Respect-supporting general secretary, Mark Serwotka – displaying, sadly, a crushing lack of economic understanding – claims that localising pay rates would “institutionalise poverty“. In fact, it is precisely this kind of distortion which can cause a market failure, leading to a lack of jobs altogether. And there’s little that institutionalises poverty more than that.So, in short, some people get overpaid for where they live and some people get underpaid. The fixed national rate distorts the pay rate away from the “fair” cost of living in a region. Pretty obvious stuff really, in that unless the cost of living were uniform across the country – which it is not – this is always going to happen.
The obvious question: is it not, then, sensible, to vary pay rates across regions, as they do in many other countries with not quite as centralised a tradition as ours? Will the sky really fall in, Chicken Licken? Why exactly should public sector workers be paid the same in the south east and the north west?
There is a third, more difficult-to-accept argument, and it’s this: if this is the right course of action, why did Labour not do it in thirteen years of government? Gulp. Looks like we might have to come clean on this one.
It is truly difficult to believe that no senior Labour figure had ever contemplated this in thirteen years, because it’s common sense. But here we get to the world of realpolitik and the British parliamentary system, which has only limited state funding and relies on funding from outside sources.
We, as Labourites, do not seriously expect the Tories to reform the banks, because…well, it’s obvious, isn’t it? Their funding comes from a number of city sources. True enough. However, the thinking that Labour might just be guilty of influence away from a course of action because of its union funding base is somehow anathema to us. That’s the kind of thing only the wicked Tories do.
Only it’s not true, is it?
So, I put it to you, m´lud, that senior Labour figures might well have contemplated scrapping national pay rates, momentarily. And, on doing so, would have almost as quickly shelved it, because of the political impossibility of selling it at party conference. But that doesn’t mean it’s wrong.
So far, Miliband has been silent on the subject, and Balls has said it would spark “anarchy” in pay rates (although Labour already introduced it in the courts service). Neither, at least, seems to have said it is unfair.
But to come out unthinkingly on the union side is to perpetuate a system which is obviously anachronistic. More to the point, it makes a mockery of our “fairness in tough times” agenda, because the current system patently is not.
Finally, such a position boxes us into looking after our friends in the public sector, deserving though they might be, against the rest of the country, who can go hang. Again. And an awful lot of the rest of the country is non-unionised and works in the private sector. What about those people?
In short, George Osborne has come up with a rather reasonable suggestion and, at the same time, he is inviting us to walk into his trap and oppose it.
Please, Eds, think.
This post first published at Labour Uncut