by Joe Mayes
Amidst the pasties, the top-rate tax cut and reducing relief on charitable donations, last month’s Budget also saw Chancellor George Osborne announce plans to expand the use of regional pay in the public sector. Under the current system nurses and teachers have their pay adjusted to reflect higher living costs in and around London whilst some employees in the prison service also have their pay weighted to accommodate for local costs. Osborne’s plans, however, would significantly expand this use of differential pay to encompass other regions, such as Wales and the North East.
So what to make of this proposal for more regional pay? Would this not be unfair on those people living in the north of England who could end up getting paid less than someone doing a similar job in the south? Would it not also further widen the North-South divide in the UK, with those struggling in the old industrial cities of the North looking on enviously at their richer southern counterparts, perhaps even abandoning the region altogether to pursue greater prosperity closer to London?
Despite what the trade unions will have you believe, the answer to both of these questions is ‘no’. On the issue of fairness, greater use of regional pay would in fact be more just than the current system. At the moment, as is clear from a recent report by the NHS Employers organisation, a nurse in Southampton doing the same job as a nurse in Durham earns the same salary despite the prices of things like food, drink and housing being higher in the South. This isn’t right. It’s eminently more sensible to take into account local prices when setting pay because this way you ensure similar standards of living for workers doing similar jobs.
On the issue of the North-South divide, the answer is a little more nuanced. In the short term, yes, setting pay regionally may well impoverish the North and exacerbate the wealth gap with the South – new recruits in the public sector would have less money in their pockets and this could depress consumer spending and subsequently economic activity. All the old Keynesian arguments would apply and the North could see a temporary slump.
But in the long run this policy of regional pay stands to rejuvenate the North. Firstly, it could make it easier for private sector firms to hire the best talent in and around cities like Durham. Currently small and medium enterprises struggle to compete with the wages offered by the public sector and subsequently find it difficult to hire those talented employees needed to make a business flourish and grow. For example, an Institute of Fiscal Studies report from earlier this year showed that wages in the North East are 30% higher in the public sector than in the private sector for full-time working men. If regional pay were in place and wages in the public sector better matched those in the private then this issue of struggling to recruit talent could be less of a problem and we could see more entrepreneurial activity in the North. In the long term this means more jobs, more growth and higher standards of living. The short-term cost might be a few years of depressed activity, but it’s a price worth paying.
And secondly, the policy is coherent with the equally sensible idea of rebalancing the economy of the UK. In the good old pre-credit crunch days of a soaring financial services industry in London, the government could afford to shower the North with the proceeds of the economic boom and artificially keep unemployment down by creating lots of public-sector jobs. Unfortunately the music has now stopped and we’ve come to realise that this is an unsustainable way of running a regional economy. Any policy that can therefore encourage the North to wean itself off these public sector jobs should be welcomed and that’s why expanding regional pay is such a fundamentally sound idea.
However, as with most things, there’s a catch. Expanding regional pay will also affect teachers and here’s where I think the government’s getting it wrong. Although it’s not conventional to single out one aspect of the public sector as more important than any other, I think the education arm is of particular strategic significance. It’s the intellectual powerhouse of our economy, producing the workers, thinkers and the innovators upon which the future prosperity of Britain depends. The only way we’re going to become world leaders in areas such as bio-technology, alternative energy and manufacturing is by enthusing the next generation and giving every child in the country a top-class education. This begins with inspirational teachers.
That’s why I think we should be putting up pay for teachers everywhere, certainly not reducing it. We need to get the sharpest, most enthusiastic graduates into classrooms. Programmes like Teach First are a step in the right direction but the government needs to do more and back this up with cold hard cash. If a university-leaver sees that there’s a good living to be made out of going into teaching then we’ll see standards rise and we’ll take a step closer towards a world-class education system.
So that’s my message for Osborne: be bold. Expand regional pay. But at the same time make teaching an elite, well-paid profession that attracts the brightest and best. Our children will thank us if we do.