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.
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