Ed Balls writes to George Osborne on delivering fairness on pay restraint

Ed Balls MP, Labour’s Shadow Chancellor, has today written to George Osborne calling on the Government to deliver fairness in pay restraint.

This follows his article at the weekend in which he said the Government should “ask the pay review bodies to deliver the 1% average settlement cap in a fair way – being tougher to those at the top in order to offer more protection to those at the bottom.”

The text of the letter is as follows:
 
Dear George,
 
FAIRNESS IN PAY RESTRAINT
 
I am writing to you to raise the question of fair pay in the public sector, and fairness in delivering the further pay restraint which you have been forced to announce to deal with the consequences of the failure of your deficit reduction plan.

In 2009 Labour recognised the need for restraint on pay in the public sector as part of a balanced plan to get the deficit down and secure the recovery. We announced a 1% pay cap for two years, but we sought to impose pay restraint in a fair way, including freezing pay for the highest paid workers like senior civil servants and NHS managers.

In your 2010 budget you continued Labour’s policy and went further. But in announcing a two year pay freeze, you also promised a £250 a year increase for the 1.7 million lowest paid workers. In reality you failed to guarantee that rise for, according to House of Commons Library estimates, around one million low paid workers mainly in local government. That is wrong and unfair. Can you explain whether you intend to deliver on this promise?

As we have consistently warned over the last 18 months, cutting spending and raising taxes too far and too fast has choked off the recovery and pushed up unemployment. That is why Labour is calling on the government to adopt our five point plan for jobs and growth to get the economy moving again and unemployment down.

But with your refusal to change course and the costs of rising unemployment pushing up borrowing projections so massively to pay for this government’s economic failure, Labour will not oppose your decision to extend pay restraint for a further two years with a one per cent cap. Jobs must be the priority before higher pay.

As I said on Saturday, discipline in the public and private sector needs to be accompanied by fairness.
Your failure to deliver on your promises to  low paid public sector workers so far shows why public sector workers deserve a real guarantee that this settlement for the two subsequent years will be delivered fairly.

The difference between a pay settlement delivered fairly and one which is not is stark. Two years of a one per cent increase in the salary of a local government chief executive earning £190,000 a year is over £3800 a year, or more than £316 a month.

For a teaching assistant earning just £15,000 two years of a one per cent increase represents just £300 a year – or just £25 a month.

By being tougher on those at the top we believe that, going forward, rises of at least the £250 a year which you promised but failed to deliver can be achieved for the lower paid – which in this case would leave a teaching assistant £200 a year better off at the end of the two years than a settlement which does not reflect difference in salary.

That is why I am calling on you to write again to the pay review bodies and the local government employers and this time ask them to consult and report on how you and they can guarantee to deliver the 1% average settlement cap in a fairer way than you have delivered so far – being tougher to those at the top in order to offer more protection to those at the bottom.
But as I said this weekend, we will oppose any moves to undermine the pay review bodies by shifting wholesale to regional and local bargaining in the public sector. Of course, as has been the case for some time, pay needs to reflect local circumstances, for example the need to recruit teachers in London. But I believe the consequence of breaking up national pay setting through the pay review bodies will be to make pay restraint harder, and real reforms more difficult - with costs getting out of control. That is what the previous Conservative government found when they failed to deliver regional pay in the NHS in the 1990s.

Pay restraint in the public sector in this parliament would have been necessary whoever was in government. But your economic mistakes mean more difficult decisions on tax, spending and pay. It is now inevitable that public sector pay restraint will have to continue for longer, but it should be done in a fair way. I hope you will agree and act to guarantee a fairer way forward.
 
Yours,
 
Ed Balls MP