Local Pay Rates

George Osborne is planning on introducing local pay rates as opposed to a national pay limit. He is concerned with the pay gap he sees between the public and private sector and the effect it might have on private sector companies being able to attract the best workers. He argues that the higher rates of pay and better pension schemes offered by the public sector mean that it is difficult for the private sector to compete.

The Chancellor plans on publishing figures to show the disparity between public and private sector pay which differs regionally but is an average of 8 per cent across the country. In his view the action will help to encourage more private sector employers to take on staff since they will no longer have to compete against the much higher rates from public sector jobs. He feels that the introduction of local pay tares will help boost the economy. He's even decided to bring the date for their introduction forward from the originally planned April 2013. Business Secretary Vince Cable supports the ideas saying that increased flexibility for local decision makers is a good thing.

The reforms will mean that workers working outside of the South East will earn less. There will be a staged approach with workers at Jobcentres affected first followed by the Driver and Vehicle Licensing Agency and border guards at ports and airports. Eventually the plans will include teachers and hospital staff. In order to close the pay gap it could mean that many public sector employees find their pay frozen for some years. Those against the reforms argue that it would widen the North, South divide already prevalent.

Negotiations will local authorities about how best to approach the matter are likely to anger many trade unions. Brendan Barber, General Secretary for the TUC said that the reforms would "suck demand out of local economies, increase joblessness and worsen the North-South divide". However, the Government's plans have been backed by the Institute for Fiscal Studies who agree that the introduction of local pay rates will have a positive effect on efficiency. Despite its general agreement with the scheme they have warned of the need to implement it with care. Consideration should be paid to the variations in different occupations. To that end, the Government, although keen to bring the reforms forward, should not rush into the measures. As a result of the differing levels in occupations themselves, Doctors and Dentists will not be affected by the reforms. Nor will the Judiciary or Armed Forces.

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