George Osborne is waging a "war on teachers", unions have said, by announcing plans to link teachers' pay to their pupils' performance.
It could come to be seen as one of the most important and controversial announcements in the Autumn Statement. The chancellor announced the scrapping of national pay bargaining, giving schools the opportunity to pay teachers according to the performance of their pupils, in response to recommendations by an independent think tank.
The NASUWT has cast doubt on the study by the School Teachers Review Body, suggesting its authors may have been "leant on".
The move is a major overhaul. Teachers will get no more annual pay rises and head teachers may award teachers a salary anywhere in their pay band.
Education campaigners and unions have warned of the difficulty in assessing the performance of teachers, when a A Grade or a C Grade might be valued differently in different schools.
Christine Blower, General Secretary of the National Union of Teachers, said: “With the profession under such continual attack and criticism, the mandatory national pay scales are one of the few things that have kept the profession attractive.
"It is children who will suffer when the profession is unable to recruit and retain teachers.
Chris Keates, General Secretary of the NASUWT, said: "The war on teachers waged by the Coalition government continues.
"These proposals place virtually unlimited discretion on teachers’ pay in the hands of headteachers at a time when unfairness and discrimination are already rife. The dismantling of the national pay framework is going to be bad for children’s education and bad for the teaching profession.
"Children and young people should have an entitlement to be taught by those who are recognised and rewarded as highly skilled professionals; these proposals will not secure this.
"The NASUWT and the NUT, representing 9 out of 10 teachers, will be meeting in the next few days to consider our response to this very serious development which is at the heart of our trade dispute with the secretary of state."
Michael Gove has backed performance-based pay for teachers
The scheme has been put forward by the School Teachers Review Body, which Osborne described in his speech on Wednesday as allowing "greater freedom to individual schools to set pay in line with performance."
Keates called the proposal "seriously out of step".
“Teachers may be forgiven for drawing the conclusion that the independent STRB has been leant on. The recent replacement of three members of the Review Body by the secretary of state may not be unconnected.
“If implemented, the STRB’s recommendations would leave behind the wreckage of a national pay framework which will be incapable of delivering consistent, fair and transparent approaches to pay."
The Department for Education said it planned to accept the STRB's key recommendations - to end pay increases based on how long a teacher has taught, and that pay progression will now be based on annual appraisals.
Education secretary Michael Gove said: "These recommendations will make teaching a more attractive career and a more rewarding job. They will give schools greater flexibility to respond to specific conditions and reward their best teachers.
"It is vital that teachers can be paid more without having to leave the classroom. This will be particularly important to schools in the most disadvantaged areas as it will empower them to attract and recruit the best teachers."
Dame Patricia Hodgson, Chair of the STRB, said: "We believe our recommendations will help schools to recruit, retain and reward the best teachers.
"It will give heads freedom to manage teachers’ pay according to pupil needs and local circumstances, within a fair national framework."
Professor Carol Propper, chair in economics at Imperial College London, who has done several studies on teachers' pay, told The Huffington Post UK that, despite pitfalls, performance-related-pay had been seen to make a difference in pupils' results.
She said: "I was surprised to hear something so definitive in the Autumn Statement. But we have found that centrally regulated pay for teachers does impact on the GCSE results of pupils if they are in high-wage areas.
"That's when teachers are being paid comparatively low wages compared to the wages of people in their area, so mainly in London and the South East.
"It might only be the difference of a few GCSE points, but it might push children across the border of five A-C grades, which is so important.
"We have studied pay for performance, which was trialled under Blair, although pretty much every teacher ended up achieving that incentive pay, but in that one year where not every teacher knew they were going to get the incentive, there was a positive impact on GCSE results.
"But it is also clear that performance related pay means teaching to the test, exclusions of pupils who are not going to make the grade and probably leads to concentration of resources on those pupils on the boundary, who just need some extra support to push them over."
Teachers and civil servants march on Aldwych as they campaign for better pay during a one day strike
The NUT's Blower said: "All research shows that performance related pay does not motivate people.
"Teachers will spend more time teaching to their individual objectives. Head teachers and governors will spend much more time taking individual pay decisions for every teacher.
"It will be bad for teachers and bad for children. Individualised pay will lead to unfairness and injustice."
In May 2012 the Organisation for Economic Co-operation and Development found there was "no relationship" between pupils' test results and whether teachers were paid relating to their performance.
The research also studied different countries education systems, and found no clear reason why some education and pay systems worked better than others.
South Korea, one of the world's most improved educational systems in recent years, does not have performance related pay. Neither do France or Germany. But Finland does have some element of merit pay for teachers.
It is a subject long debated in the US, performance-related pay is favoured highly by US President Barack Obama.
In September 2012, the Obama administration announced it was awarding $290 million in grants to reward top teachers in almost 1,000 schools in 18 states plus the District of Columbia, funding faculty evaluations and performance-based pay.
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