We must all resist regional pay at any cost but Plaid Cymru's policy is awful

Regular readers of this blog will know that the focus of my writing is Westminster politics but today I feel compelled to write about an issue born in Westminster but one that will have a horrific impact on the Land of my Father…Wales. In my last post I made it quite clear that regional pay for public sector workers, as suggested by the Chancellor in his recent budget, would be an absolute economic disaster for everywhere outside the South East and London; for Wales where the gap between public and private is one of the largest in the UK the effects would be even worse.

Some early estimates are suggesting that in practice regional pay would mean the public sector pay freeze lasting 20 years in Wales – two decades of hoping that private sector wages rise roughly in-line with inflation and whilst that same inflation eats into the real terms wages of nurses, teachers and social workers across a nation with some of the worst health inequalities, educational outcomes and other deep social problems.

Regional pay is not just wrong on the moral basis outlined above, it poses practical problems, some of which Carwyn Jones, the fantastic First Minister of Wales noted in the Assembly last week: will it be based on place of work (most likely) and therefore we could have a nurse working in North Wales earning far less than his/her neighbour, another nurse who happens to commute to high-paying Chester. The alternative would be basing it on where people live but I’m pretty sure that causes legal problems and anyway it would simply reverse the problem with people being paid less for commuting.

The key failing of regional pay however is neither its moral failings nor its practical problems – it is the economics of the idea. As I outlined in my last post it is the problem that it will make a further dent in regional economies at a time when it is needed least. Reducing public sector pay will not help the private sector thrive in Wales; instead it will mean less disposable income to be spent in the retail, services and leisure sectors. The idea that private sector businesses will run to Wales in droves to offer jobs to the talented public sector workers now feeling underpaid is wrong-headed – bad infrastructure and acute social disadvantage leading to poor educational outcomes and a under-skilled workforce are far more likely to be the kind of things holding the Welsh economy back. The notion that leading staff in the public sector will become disgruntled with their ever-decreasing pay over the years and eventually quit to use their talents to start up their own businesses instead may well to actually come to fruition, but should we really celebrate the loss of talented individuals from the services designed to solve the systemic social problems of Wales that I’ve outlined?

So, I’m completely against this awful idea of regional pay in the public sector but I also think that if the UK Government go ahead with the plan then I’m afraid the Welsh Government will have to grin and bear it. Plaid Cymru’s radical new leader has already shown her own economic ineptitude and highlighted her party’s lack of competence on public spending. Leanne Wood was doing so well when in her first week she persuaded the Welsh Conservatives (along with the Lib Dems and Labour Government) to create a cross-party consensus saying no to regional pay. Yet Wood lost it when she stated that if the plans went ahead then the Welsh Government should demand responsibility for setting public sector pay in Wales (so far sensible)…so that it could maintain public sector pay at current levels (rising in-line with inflation year on year). Oh dear.

The problem with Wood’s plan is that under the Barnett Formula (which is the calculation deciding how much funding the devolved governments of Wales, Northern Ireland and Scotland get from Westminster) any savings the UK government makes from implementing regional pay across England will not be used to boost public spending in other areas but will instead be part of the cuts programme. Thus, this reduced public expenditure in England will be passed on, proportionately (ignoring the failings of the Barnett formula which means Wales gets £400m a year less than it should), to the devolved administrations. Under the plan Wood outlined the Welsh Government would then be committed to paying public sector wages in-line with the South East of England (as is the case currently) but with only enough cash to pay them the regionally adjusted rate (i.e. much less). The result would therefore be further cuts to other areas of public expenditure and/or job cuts in the public sector.

Wood is suggesting that if Plaid Cymru were the largest party in the National Assembly her Government’s response to regional pay would be (providing the UK government agreed to devolve responsibility for public sector pay to the Welsh Government – which the Conservatives, sensing the impending disaster would certainly accede to) have 45 children per class so that the remaining teachers that haven’t had to be laid off can keep getting good pay.

Regional pay is a policy that must be resisted at all costs, how the Unions can fight it whilst keeping the public on board is the challenge now. The support of the UK Labour Party as well as all the cross-party resistance from the three non-England UK nations might help to kill it off but Plaid Cymru’s response is at this stage unhelpful, defeatist and downright awful.