By Maximilian Clarke

With Chancellor Osborne set to announce the hotly anticipated 2012 Budget, the topic of regional pay for pubic sector workers has once again reared its head, bringing with it vitriolic opposition from trade unions as well as support from a number of sources.

Advocators of regional pay, which include the free market think tank the Adam Smith Institute, have welcomed the proposals as a fair and necessary reform that recognises the wide discrepancies in living costs across the UK. Its opponents, however, have blasted the move as ‘divisive’, arguing it will exacerbate the North/ South Divide and help usher in a ‘broken Britain’.

Voice, a blog for education professionals has constructed what may be among the more extreme attacks on regional pay, arguing that it could shatter Britain, leaving in its stead a fragmented, pre-industrial patchwork of competing local economies ‘where few people leave their local village or town:’

It seems... [the] Chancellor is turning away from macroeconomics in favour of microeconomics and micromanagement and a system that could break up England and the UK, returning to a stagnant pre-industrial, pre-railway age of local economies where few people leave their local village or town.

The UK’s largest union, Unite also weighed in, again emphasising the perceived destruction regional pay reform would invoke: “George Osborne is desperate to smash an enormous wrecking ball into our public sector,” said the union’s general secretary, Len McCluskey. “It makes no operational sense whatsoever to impose a structure that says a nurse or paramedic in the north east of the country is worth less than someone doing the same job in the south east.”

But Mr McCluskey’s sensationalist comments over a paramedic’s ‘worth’, fail to take into account the exorbitant living costs in the capital compared to other regional centres. The cost of living aggregators, Numbeo, have attempted to quantify this: London has an aggregate living cost (excluding property) of 126- 31% higher overall than Nottingham’s 96.

A mid-range meal for two in London, Numbeo calculate, would cost £49 - some 40% more than the equivalent in Nottingham. Therefore for a nurse to afford the same overall quality of life in London, they would need 31% more pay then their colleagues in the Midlands.

The Trades Union Congress have also hit out at the proposals, arguing that reducing pay in poor areas would drain money from deprived local economies, leading to accelerated business failures and further exacerbating cycles of poverty. But the Adam Smith Institue’s Director Dr. Eamonn Butler refutes this, adding that it is precisely because of proportionately high wages for the public sector that entrepreneurialism and growth in the wealth creating private sector has effectively been discouraged:

“Many areas of the UK are poor precisely because high wages in the public sector, brought about by the national pay rates system, have driven out private sector jobs and investment. Quite simply, when public sector wages are 18% higher, people's focus is on getting a job in government, not in the wealth-producing industries. Employers cannot compete when the public sector has an edge like that, and siphons off the most qualified workers. It means that it becomes much harder to recruit staff and start new businesses — so fewer new businesses are created, and the region remains in thrall to government, rather than developing new industries and initiatives of its own.”

It is interesting to note that Sweden, whose socially democratic economy is often cited by unions as a model for a more just United Kingdom, has far more pronounced regional pay disparities than the UK. Despite workers in less affluent Swedish regions receiving less pay than their Stockholmer counterparts, the Nordic state has a much less pronounced income gap nationally, suggesting the TUC’s claims that it will only serve to accelerate regional wealth differences are largely unfounded.

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