Local pay could ease public-sector costs

Circa 500,000 job losses will naturally affect economic growth; and redundancy and benefits costs will surely dilute the intended savings. But where is the debate about pay costs being inflated by nationally negotiated pay? Our research as consultants in this field shows very clearly that most private-sector employers with highly distributed staff apply pay systems that differentiate according to local pay markets. Moreover, the experience of our clients shows that if those market differentials were applied across the public sector, then between 5 per cent and 10 per cent of payroll savings, over time, could be found. Put another way, 25,000 to 50,000 jobs could be saved for the delivery of front-line services.Now, there is some political trickiness in all this. The biggest savings will come from setting the pay of junior staff who work well away from the south-east lower than current national rates. Many will not see that as “fair”. But how is it fair that the pay of a civil service clerk is the same in both economically depressed and buoyant areas? Surely local costs and markets should be the underpinning of what is fair?