Ending centralised pay bargaining is a very good idea

March 17, 2012 10:07 AM

This morning the Daily Telegraph reports that centralised pay bargaining for many public sector workers may be abolished at the Budget. That would be right for taxpayers; right for public sector workers; and mean better public services. The people who would lose out would be the union bosses who rely on big national battles over pay and benefits to justify their own high pay. The Government should go ahead.

How is pay normally set? The employer looks at what they have to pay in order to get the right staff.

But an NHS Trust in the South East of England, for example, can't do that. They have to pay the nationally negotiated rates and may not be able to get the right people for that money. That often means relying too much on agency staff, which is both more expensive and harder to manage than using permanent staff who can get used to working effectively together. Research at the London School of Economics Centre for Economic Performance has found that pressure on the service actually kills people: survival rates after heart attacks are lower in "areas with higher outside wages".

And neither can an NHS Trust in Wales, for example, pay a realistic wage to reflect the lower costs there. That means higher costs for taxpayers and also puts pressure on private sector businesses. Staff want to work for the national public sector rates rather than often lower pay working for a local company, so those companies find it harder to hire people. The Institute for Fiscal Studies has found that the national public sector pay premium is 8.3 per cent, but the premium in Wales is 18.0 per cent for men and 18.5 per cent for women.

Ending centralised pay bargaining wouldn't just mean taxpayers could get a better deal, and better public services; it would also mean that pay for the staff themselves would better reflect their actual costs. On balance, that has to be fairer.

This is the right change to make and the Government shouldn't let the inevitable howls of protest from the unions dissuade them.This morning the Daily Telegraph reports that centralised pay bargaining for many public sector workers may be abolished at the Budget. That would be right for taxpayers; right for public sector workers; and mean better public services. The people who would lose out would be the union bosses who rely on big national battles over pay and benefits to justify their own high pay. The Government should go ahead.

How is pay normally set? The employer looks at what they have to pay in order to get the right staff.

But an NHS Trust in the South East of England, for example, can't do that. They have to pay the nationally negotiated rates and may not be able to get the right people for that money. That often means relying too much on agency staff, which is both more expensive and harder to manage than using permanent staff who can get used to working effectively together. Research at the London School of Economics Centre for Economic Performance has found that pressure on the service actually kills people: survival rates after heart attacks are lower in "areas with higher outside wages".

And neither can an NHS Trust in Wales, for example, pay a realistic wage to reflect the lower costs there. That means higher costs for taxpayers and also puts pressure on private sector businesses. Staff want to work for the national public sector rates rather than often lower pay working for a local company, so those companies find it harder to hire people. The Institute for Fiscal Studies has found that the national public sector pay premium is 8.3 per cent, but the premium in Wales is 18.0 per cent for men and 18.5 per cent for women.

Ending centralised pay bargaining wouldn't just mean taxpayers could get a better deal, and better public services; it would also mean that pay for the staff themselves would better reflect their actual costs. On balance, that has to be fairer.

This is the right change to make and the Government shouldn't let the inevitable howls of protest from the unions dissuade them.

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