Regional split in public sector pay 'could cause spiral of decline'

Sixty academics have warned that the Government's controversial plan to introduce regional pay rates in the public sector could cause huge economic damage and widen inequalities between different parts of the UK.

There is "no convincing evidence" that regional or local pay rates will boost the economic performance of local economies and could reduce consumer spending, the academics said.

Unions have been campaigning against any move to have different pay rates for public sector workers, and officials welcomed the intervention.

Ministers are considering whether to press ahead with plans that could end national pay bargaining, following a review instigated by the Chancellor in last year's autumn statement.

The academics include leading figures in the field of regeneration and economic development, and their letter to The Times newspaper has been co-ordinated by Keith Shaw, a professor of politics at Northumbria University.

He said: "This proposal will depress public sector pay in regions outside of London and the South East and, in areas such as the North East, could lead to a spiral of decline that would serve to further widen the ever-growing north-south divide.

"This concern is also shared by a number of North East businesses and government MPs in the region, who are also opposed to the proposal."

John Tomaney, professor of urban and regional planning at University College London, said: "I have serious concerns that the full impact of what has been discussed in terms of regional or local public sector pay has not been appreciated by the Government.

"Reducing wages and spending power in the poorest regions can only widen divisions and harm any economic recovery."

Edmund Heery, professor of employment relations at Cardiff Business School, said: "Regional pay will remove income from and thereby further impoverish the Welsh economy, make it harder to attract good-quality candidates for vital service jobs and waste money by adding a new regional level of pay setting for employers and employees alike."

Commenting on the letter, TUC general secretary Brendan Barber said: "This is yet more evidence that the Government's plans for regional or local pay are not just unfair but ill-thought out. They will end up costing local economies dearly as public sector workers in poorer regions rein in their spending.

"The Chancellor should take the views of these many academic experts seriously and put a stop for once and for all to these flawed and counterproductive proposals.

"Introducing a postcode pay lottery which would effectively cut the wages for nurses, teachers and dinner ladies in poorer parts of the UK won't boost regional economies one bit. Instead it risks doing irreparable harm to the whole economy and to our public services."