The Tory Argument Against Regional Pay

It’s not common for a Government to conclusively lose the argument about one of its own policies purely on the basis of the evidence.  Ministers are usually able to construct something resembling an intellectual fig-leaf which maintains their dignity and allows them to press ahead with their project.  Not so with regional pay in the public sector.  Ever since George Osborne announced his grand plan to introduce “market-facing pay” in his 2011 Autumn Statement, it has increasingly looked like a policy in search of a justification.

You can count them off as they’ve fallen.  First and foremost, Osborne claimed that national pay bargaining “crowded out” private sector jobs and investment because “businesses that need to compete with higher public sector wages”.  Crowding out theory has since been exposed as economically illiterate twaddle by independent labour market analysts and many others. The same has happened with regional living costs, comparisons with national private sector organisations, regional investment strategy and service quality.

All of this was topped off this week when a letter to the Times from 60 senior academics working on regional issues concluded there was “no convincing evidence” to recommend regional pay.  At the risk of sounding like a Govite elitist, the signatories were of the slightly more specialist and august variety than those who had signed an earlier letter backing the policy.

So where does this leave Tory MPs and supporters who are increasingly uncomfortable at seeing their Chancellor pushing ahead with this policy?  My concern is that despite the evidence, many will continue to back him.  Osborne continues to present this policy as free market radicalism vs  trade unions and public sector workers.  For Tories, this is a powerful message.  Never mind the evidence, this has become a question of which tribe you belong to.

But this doesn’t have to be the case.  If you look at this issue carefully, there are very sound reasons for resisting this policy which most moderate Tories can rally around.

The labels used in this debate (including by me, in the title of this post) are misleading. People pose the question: Are you for or against regional/local pay in the public sector?  In truth that is not the debate we are having at all.  There are elements of regionalised pay and local flexibility already existing in public services, such as recruitment supplements, London and South East weighting. These were negotiated with trade unions and represent workable solutions to practical issues.  A much more accurate, though less catchy, description of the debate would be: Are you for or against dismantling national pay bargaining in the public sector?

The crucial point for any one nation Tory looking at this issue is this: something exists, it’s developed gradually over a long period of time and it works. It is, in short, an institution. The expansion of national public sector pay bargaining began between 1910 and 1920, most notably as a result of the “Whitley Councils”, named after the Liberal politician who championed them. Ever since it has slowly developed and adapted to changing circumstances, moving with the times, but maintaining its legitimacy, in part because of its endurance.

Tory Philosopher, Michael Oakeshott put it very well indeed when he wrote:

“To be conservative, then, is to prefer the familiar to the unknown, to prefer the tried to the untried, fact to mystery, the actual to the possible, the limited to the unbounded, the near to the distant, the sufficient to the superabundant, the convenient to the perfect, present laughter to utopian bliss.”

If I were a Tory, this would be my argument to George Osborne:  “You’ve no evidence to back your claims for efficiency or growth, so we are forced to conclude that this policy is nothing more than a neo-liberal smash and grab. On the basis of an ideological whim, we stand to reap the chaos which always follows the destruction of long-standing institutions.  Don’t do it George!”

Let’s hope they have the backbone to stand-up for real Tory values.