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Regional Pay: The Real Issue for Trade Unions in 2012

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Although many of them have yet to realise it, busy as they are with the ongoing discussions on public sector pensions, the big issue for trade unions in 2012 will be the implementation of regional pay and the break-up of the national pay bargaining schemes.

The announcement of radical changes to public sector pay was slipped in to George Osborne's 2011 Autumn Statement, as he requested that pay review bodies report back to him by July on the prospect of introducing what he terms 'local-facing' pay, pay which relates to local economic conditions between the public and private sectors.

The aim, he outlined to the Treasury Committee a week later, was to introduce this in the 2013-14 pay round, presumably with an announcement in this year's Autumn Statement or the Budget of Spring 2013.

In a period of public sector job cuts, wage freezes which amount to real terms cuts and the pocket-picking scandal of un-necessary public sector pension changes, these proposals are distinctly unlikely to benefit the public sector workforce.

Given that the trade unions continue to bung Labour around £10m a year, you might expect that Labour would be leading the attack on these proposals but, like their half-hearted opposition to the public sector pension changes they are fighting with one hand tied behind their back - Osborne is merely expanding a policy previously introduced by Labour in the Ministry of Justice in 2008. How can Labour attack their own policy?

The raison d'etre behind these changes, apart from the strong possibility of making some spending cuts at the same time, was to 'rebalance' the economy and avoid the public sector 'forcing' out the private sector.

Like many arguments, it has a pinch of common sense to it. Indeed, in the normal run of affairs we should not expect that public sector pay should be a barrier to private sector development.

But this is the same flawed argument that led to the austerity cuts being introduced in the first place - a supposed zero sum game between public and private sector which would see a private sector job created for every public sector job cut.

It hasn't happened like that - the reason that many of those public sector jobs were in those locations was precisely to make up for the failure of the private sector, and often little has been achieved in addressing the reasons for that failure.

In those areas with an under-developed private sector, public sector employment provides a crutch - jobs which are relatively well paid for the local employment market, relatively safe and also which include an element of public service.

There is already a severe economic geographical imbalance between London and the south-east of England and much of the rest of the UK and reducing public sector pay in the those locations - a sort of reverse London weighting - would allow the chancellor to make cash savings by breaking up UK-wide pay agreements.

Kicking away that crutch will not improve the private sector but handicap the entire local employment market, institutionalising low pay and, very probably, low ambitions, creating employment ghettos.

My concern is that, despite these likely effects, the twin siren call of saving money and dismantling the public sector may be too much for the chancellor to ignore.

With this continued, if not heightened attack on public sector services, another year of industrial disputes awaits us.

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