Public sector pay 2012: Budget set to end national pay rates

Chancellor George Osborne is expected to include plans to introduce local pay in parts of the civil service from this year (on Guardian website) in the Budget on 21 March 2012.

Government departments that started the two-year public sector pay freeze in 2010 – including the Home Office, the Department for Work and Pensions and the Department for Transport – are reported to be the first that will see pay aligned more closely with local salaries in the private sector and the cost of living.

Osborne raised the issue of market-facing pay for the public sector in the autumn statement last year. He has asked the public sector pay review bodies covering NHS workers in England (except doctors and dentists), the prison service and schoolteachers in England and Wales, and the senior civil service, to examine how pay could be made more responsive to local labour markets. The judiciary and the armed forces are not included in the plans.

The review bodies have been instructed to consider whether the new approach could be delivered within national frameworks and whether it should apply to existing staff or only to new entrants. Any proposals are also required to be affordable, and not lead to any increase in the paybill in the short or long term. The findings are due in July this year so they can feed into the 2013/14 pay round.

The autumn statement also announced that the Minister for the Cabinet Office would review how more local, market-facing pay could be introduced in civil service departments. The Civil Service Pay Guidance for 2012-13 confirms that the Cabinet Office is working with departments to develop an agreed view of the market rates for different roles in different locations in the civil service and an agreed metric for determining whether an individual department is paying above the rate for a job role. All main departments and non-ministerial departments are to submit three-year pay strategies to the Cabinet Office by the end of May 2012, which “among other things, explain how they are going to move to more market-facing pay structures in the short to medium term.” These strategies will inform pay remit decisions for the 2012 pay round.

Speaking on the Today programme on BBC Radio 4 on 17 March 2012, business secretary Vince Cable refused to confirm or deny whether local pay rates would be introduced in the Budget, but said he supported the principle and believed it was important to have more flexibility and local decision-making in the public sector.

Since the question of local pay was raised last year, critics have voiced concerns that the move would further damage local economies that are already struggling. Commenting on the reports that it would be introduced in the Budget next week, Public and Commercial Services union general secretary Mark Serwotka said: “Driving down pay even further at the same time as cutting public sector salaries and pensions, and planning to cut the 50p tax rate, would not only be cruel, it would be economically incompetent and counterproductive.” 

Plans for regional pay have been opposed in Northern Ireland, Wales and Scotland. The Welsh Government’s first minister Carwyn Jones described the introduction of market-facing pay as “potentially a way to cut the pay of over 300,000 hard-pressed public sector workers in Wales by the back door.”

A private members’ debate on the subject was held in Westminster Hall on 10 January 2012, during which the prospect was raised that regional pay could become as important an issue in industrial relations as public sector pensions reform.

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