No 10 says local pay agreements will be introduced only if there is a ‘rational case’ as Nick Clegg reportedly threatens veto
Downing Street has indicated that the government is preparing to embark on a U-turn over plans by George Osborne to introduce local pay agreements in the public sector.
Amid reports that Nick Clegg is preparing to veto the chancellor’s plans, No 10 said local pay agreements would only be introduced if there was “strong evidence” and a “rational case” for a change.
“Our case is unless there is strong evidence to support it – and there is a rational case for it – then it won’t change,” the prime minister’s spokeswoman said.
Downing Street indicated that the government might be embarking on a rethink after the Independent reported that the Liberal Democrats had become increasingly hostile to the idea amid fears that local pay agreements could deepen the north-south divide. A Lib Dem told the newspaper: “It would play into all the claims that our opponents make about the coalition.”
Osborne announced plans for local pay agreements in his autumn statement last November. He told MPs: “I can announce that we are asking the independent pay review bodies to consider how public sector pay can be made more responsive to local labour markets – and we will ask them to report back by July next year. This is a significant step towards creating a more balanced economy in the regions of our country that does not squeeze out the private sector.”
The chancellor was strongly supportive of local pay agreements for two broad reasons. He thought it would bring down the public sector pay bill and would help revive the private sector in areas of the country dominated by the public sector. The Treasury said relatively high public sector salaries could crowd out the private sector.
The prime minister’s spokeswoman indicated a rethink was under way when she stressed that no decisions had been made. The spokeswoman said: “This issue is still under consideration so no decisions have been made. The chancellor announced in the autumn statement there was a case for considering how public sector pay could better reflect local labour markets. It is the independent pay review bodies that are currently considering the case for greater local pay flexibility in the wider public sector. But nothing yet has been decided.”
Asked whether local pay agreements would apply to MPs, the spokeswoman said: “Our case is unless there is strong evidence to support it – and there is a rational case for it – then it won’t change. That [applying it to MPs] is not something we are particularly looking at.”
The Welsh government finance minister, Jane Hutt, said: “We have already published evidence showing the case for regional pay is flawed. The case presented by the Treasury for regional pay is full of assertions made without any solid basis in the evidence.
“The UK government now has the evidence it says it needs to drop these plans. We now expect them to do so.”