The imposition of public sector regional pay, announced in today’s Budget, could have some unintended consequences, starting with its impact on labour mobility
In today’s Budget, George Osborne confirmed his plans to push through regional pay settlements for the public sector. This is likely to affect not just civil servants, but teachers, nurses and police officers, once current pay freezes have finished.On the face of it, this makes good financial sense. Relative pay between public and private sector workers is much higher in parts of the North than it is in the South East. London already has a weighting payment to reflect higher costs in the capital, so why not have regional pay levels in every region?
But it is not as simple as that. The market for many public sector workers is not a regional one, but a national one, particularly with senior posts like headteachers or senior civil servants. It is already very difficult to move back into London if you have moved to take up a post in the regions. Now it will be harder to move between regions, making it more difficult to match the right people to the right job. This could prove an added complication when trying to rescue failing schools or respond to Ofsted’s tougher inspections, for example, or to persuade more public bodies to move out of London.
In education, there is an added complication. 1600 academies are able to set the their own pay rates, though the majority follow national guidance. They will certainly be in a stronger position to recruit the best talent if they choose to vary from the norm, potentially distorting the market and outweighing any savings from the regional pay cuts where wages are lower. And it does seem odd to be talking about regional pay at the same time as schools are all being encouraged to go it alone.
Of course, there is one group that gains from this move: the teaching unions. They will have the chance to negotiate separate deals for each region and have much more work to do with the school teachers’ review body, so will find they have more to do than ever. But I’m not sure they were the beneficiaries George Osborne really had in mind when he announced the move.