Osborne needs to rethink regional pay

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The chancellor appears to be preparing to abolish national pay arrangements for the public sector. This would be a bad idea at a time when staff need more motivation,  not less

The expectation that the government intends to end national pay systems is bad news for public sector employees who live outside the economic hot spots.  With the prospect of further cuts to their take home pay and living standards, many have already seen their pay frozen and in many cases cut this year, and also face the prospect of increased employee pension contributions.  They have seen colleagues made redundant and they know that there will be more redundancies over the next few years.

There is every prospect that there will be much more outsourcing to the business and social sectors.  In some service areas, the role of the state is changing fundamentally.  For example, social care service users are directly purchasing their services and there is a strong likelihood that the same approach will be applied in other service areas.

Although some of these changes could and can be empowering for staff, it is hardly surprising that many are feeling anxious, uncertain of the future and worried.  At the very time when there is a need to motivate and support staff, the chancellor appears ready to strike with the abolition of national pay arrangements; and probably the abolition of what remains of effective national negotiation machinery.  There are already regional and sub-regional variances in pay and other terms and conditions across the public sector; and national agreements allow for this but within agreed frameworks. And these tend to be marginal differences. Institutions – such as academies and foundation trusts – that can move from national pay scales have been reluctant to do so. The government seems to want to open up even greater differentials at a time when living standards are falling.  This will be challenging and could be counter-productive.

The government has already removed much of the protection for staff when public services are outsourced.  The ‘Two Tier’ Code has been torn up so that outsourcers can employ people on lesser terms and conditions that those employees who were protected through TUPE arrangements.  And as we saw in the past, less scrupulous employers will use this situation to drive adverse changes to the terms and conditions of staff who otherwise have TUPE protection; or they will create higher levels of staff turnover in order to recruit lower cost staff – this is precisely what happened all too often under the previous Conservative government’s Compulsory Competitive Tendering regime.  The ‘Fair Deal’ in pensions is being abolished too.

There are even some business and social sector employers calling for the TUPE legislation and the remaining pension requirements to be further watered down. Thankfully, TUPE should be beyond such change as it is European Union based.

If the government gives licence to differential pay across the regions and possibly between places within the same region, public sector employees will have good reason to be  anxious.  And those employed to deliver public services but who are employed in the business and social sectors will likely have even more reason to be worried, rightly fearing that their employers may well seek to impose ‘local market’ rate wages and salaries, and indeed other terms and conditions even faster than the public sector could be forced to by the government policy.

There is also a risk that in competing for labour, public sector bodies will actually force up labour costs in some places; and there is a further risk that some public service workers will be attracted to work in areas such as London rather than the less affluent regions. Such results could distort public service provision.

The irony is that an unintended consequence of the government’s sledge hammer approach to public service employees’ terms and conditions could be to make its public service reform programme even harder to implement.

It is a given that there is much need for major changes, right across the public sector, and decisions are needed urgently on what public sector organisations will do/no longer do, and how they will do whatever they decide to do.  And some of these changes will undoubtedly require revisions to terms and conditions for some staff – and in some cases, very different new terms and conditions.  This is inevitable.

However, the route to getting there is another matter. Best practice from the business and public sectors is to ‘engage’ well-motivated staff and their trade unions in change programmes.  Changes to terms and conditions should be secured through consensual negotiation – not central government imposition.

My fear is that as staff and their unions move into defensive mode and react vigorously against the government’s onslaught, it will be much more difficult if not virtually impossible to have any meaningful negotiation at a local or national level. This in turn could delay or worse, derail the wider public service reform programme.  And understandably, millions of public sector employees will equate the words ‘public service reform’ with ‘worse terms and conditions and lower pay’. Confrontation will easily begin to eclipse engagement for reform, and that is going to be a disaster for all sides.

Increasingly, I have noted local authorities and others seeking to introduce progressive measures such as paying the ‘living wage’ and even, as in the case of Lewisham Council, also requiring suppliers to pay it extending staff consultative processes to cover strategic commissioning and service redesign; and having serious conversations about the development of employee-led co-operatives and social enterprises.  All of this could be at risk.

Research across all sectors, UK and overseas, has consistently found that there is a significant and positive correlation between good staff terms and conditions, staff motivation and service standards.  If service standards are put at risk in order to speed up the deficit reduction or to offset other government fiscal decisions, the losers will be those who use public services and their communities.  The victors will be an odd coalition of those trade unions leaders who seek confrontation rather than consensual change (the majority of course being in the latter category) and those who are ideologically opposed to decent public services. It is to be hoped that the government will think further before it acts.

About John Tizard

John Tizard is an independent strategic adviser and commentator on public policy and public services. He works with a range of public, private, third and academic organisations. He was the founder director of the Centre for Public Service Partnerships and before then a senior executive at Capita and at Scope. He has been a councillor and leader of a county council. He holds various non-executive and trustee appointments including at Navca, Tomorrow’s People, Action Space and Collaborate. He is chair of the Isle of Portland Aldridge Community Academy.

One comment on Osborne needs to rethink regional pay

  1. Maz says:

    The idea that there is currently one pay rate for similar roles across the country in local government is a myth. There is national collective bargaining and standard terms and conditions but if you look at and analyse job adverts for the same roles across the country you will find huge variations in pay. Take the s151 officer role, salaries range from circa £45k to over £100K. The differences may to a small extent be due to slight differences in the roles but this seems to be at the margin, largely the differences reflect the area that the job is in. A small rural authority will pay far less than a large London Borough for instance. Grades are used to hold the pay in line with local employment conditions. Is what is really being suggested by the government the breaking of national terms and conditions so that individual employers can reduce annual leave, take away sick pay, increase working hours and reduce basic pay by dismissing and re-employing their staff after due consultation of course? I suspect so. Perhaps it is different in other parts of the public sector but I suspect that the grades are used to vary the pay to local conditions in other areas as well. This idea is another one to demonise the public sector without the public ever being given the real facts of the matter.


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