Kevin Rowan, Regional Secretary, Northern TUC

03 October 2012

Kevin Rowan on the Liberal Democrats' part in the regional pay dispute

This article was originally published on September 24th, prior to the Liberal Democrat Party conference. It has since been announced that delegates at the event voted against Regional Pay. How much difference will that make? Read on to find out more...

It has not often been the case that the Liberal Democrat Party conference merits much attention, especially economically.

But their presence in coalition government with the Conservatives certainly changes that and the debate around the potential introduction of regional pay will be of interest to all public sector workers, especially here in the North East.

The conference will be discussing their position on opposing the introduction of regional pay. In some respects you would expect this to be one of the more straightforward debates of the week. Party President, Tim Farron, has been very outspoken in his determination to prevent its introduction; Business Secretary, Vince Cable, is openly sceptical about the ‘case’ for regional pay and concerned about its unfairness; and Party Leader and Deputy Prime Minister, Nick Clegg, has stated his opposition, although the jury remains out on whether or not that actually means anything.

Lib Dem opposition to the introduction of regional pay is not unimportant; it is, however, the Chancellor’s views that are going to be telling. George Osborne is currently considering responses from the public sector pay review bodies, following a Treasury initiated consultation on implementing regionalised pay. The argument was that the public sector was ‘crowding out’ private sector growth.

Since those assumptions were made there has been much analysis and debate on the subject. An Incomes Data Services report for public services union Unison pretty much demolishes the notion that public sector workers are treated generously in the labour market, finding that only hospitality, retail and distribution workers endured lower pay than the majority of public sector workers, with banking and financial services at the top end of the scale, outstripping manufacturing and construction.

The crowding out claims have also been rubbished. The Institute of Directors, not noted for its support for trade unions or the public sector, confirmed that this wasn’t the view of private sector employers, only 7% of their membership suggesting it was a concern with almost 60% saying it clearly was not a problem. Crowding out is even less likely in times of recession. Nor is this just a public sector issue. Analysis by the New Economics Foundation found that this would have a detrimental impact not just on public sector wages in lagging regions like the North East, but there is also a downside for the economy generally. In this region, that downside manifests as £761m per year taken out of the economy and around 9,000 jobs.

Nationally, regional pay could result in a loss to the economy of £10bn and over 110,000 jobs. Even where there is such clear evidence that such a move would be overwhelmingly bad for the economy and acutely damaging to the North East, it is still not certain that the Chancellor, keen as always to show his credentials and facing continuing failure on the whole range of performance targets, economic growth, employment, debt and borrowing, might just be belligerent enough to press ahead.

Many thanks to Kevin Rowan for allowing the republication of his article on the IER website. The article was originally published in NE Business.

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