Regional pay - will he, or won't he?

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We will very shortly know whether the Chancellor will or will not propose the introduction of Regional Pay as part of his budget.  The mood music has been confusing and changeable over recent days; the current balance of opinion seems to be that it will not be introduced after all.

If that turns out to be true, no doubt some will heave a great sigh of relief.  That looks premature to me, however.  Given the regularity with which the idea has been floated, by Labour and Conservative-Lib Dem governments alike, I think we can take it as read that our real masters – the senior civil service – are committed to the idea and will continue to press whoever happens to be in government at the time to introduce the concept.  History suggests that they’ll probably get their way eventually; this is not an issue which is simply going to go away.

There are good reasons to oppose it, of course.  Not only is it a direct – and almost certainly deliberate – weakening of hard-won rights to collective bargaining and equality of treatment of employees, it is also a mechanism for reversing the fiscal transfers which are inherent in the current unified approach.  It is, in short, a mechanism by which GVA and wealth are removed from the poorest areas and transferred to the richest.

It does however leave those of us who support independence with something of a dilemma, because it is inherent in our position that wage levels in the public sector should be set in Wales rather than for the UK as a whole, and it is easy to see why opponents suggest something of an inconsistency here.  Whilst there might be a difference in the underlying principle between the introduction of regional pay set at a UK level and the devolution of pay rates to Cardiff, the potential impact on individual pay packets may not look that different.

In the short term, devolution of power to set wages would almost certainly offer better protection for public sector employees in Wales than would be available for those in the poorer areas of England; it seems certain that the Welsh Government would use such powers to maintain a level of parity.

Longer term, though, there can be less certainty. 

There are two not inconsiderable practical issues.  Firstly, if wage rates across England start to diverge, with what level of wages would the Welsh Government seek to maintain parity?  London rates?  The England average?  Some sort of notional starting point enhanced by inflation?  The second is the question of impact on budget.  I don’t doubt that the UK Government would ‘adjust’ the Barnett formula based on what pay rates would be if they were set in London; maintaining higher pay rates than that would inevitably impact on other budget areas.

Then there’s the question of principle.  Why would an independent Wales – or even a devolved Wales with the right to set public sector salaries – always do so by reference to salary levels set elsewhere, rather than in line with local circumstances and needs?  As far as I’m aware, Dutch civil servants’ salary isn’t set by comparison with what is paid in Germany – why would the relationship between England and Wales be any different?

The context is different, of course.  Opposing the introduction of regional pay, and proposing the devolution of power over the issue are, in my view, the right things to do for Wales, even if they appear contradictory.  But we do need more clarity of thinking over the longer term consequences of the latter.  And the issue underlines the danger of looking at pay rates in isolation – devolving pay rates as a stand-alone matter may create as many difficulties as are resolved.