Vince Cable warns of "practical problems" with Osborne's regional pay plans

By Jonathan Walker on Jan 26, 12 04:21 PM in Politics

Business Secretary Vince Cable has hinted at a division within the coalition over plans to introduce controversial regional pay deals.

Proposals to end national pay agreements in the public sector were a surprise announcement in George Osborne's Autumn Statement last year. The policy is opposed by unions and Labour - but Dr Cable, one of the most senior Lib Dems in the Cabinet, has now warned there are "practical problems" with the proposal, calling it "a subject we'll have to approach with very great care".

In today's Birmingham Post we've published a lengthy interview with Dr Cable, who spoke to representatives of regional newspapers about a wide range of topics including high speed rail, city mayors and the failure of big cities to match the economic success of their equivalents on the Continent.

But he also hinted that he had doubts about regional pay, a policy which is supposedly designed to help private sector employers in regions outside London to compete to staff.

He said: "In terms of regional pay, the Government's overall approach is to try to encourage flexibility.

"But I do recognise the practical problems in the public sector. It isn't just the political issue - the fear that people will be levelled down in some of the relatively low wage areas - but I think there's a genuine problem about how you get a career progression structure for a long term public servant.

"It is very complicated.

"But the Government's expressed wish is to try to get more flexibility."

Dr Cable pointed out that there were also voices calling for more regional pay, because the "living wage" campaign is effectively a call for higher wages in areas with higher living costs.

He said: "The pressure for regional variation is also on that side as well . . . there are two sides to all this but I do recognise the practical difficulties and it's a subject we'll have to approach with very great care."

The Chancellor has asked pay review bodies to consider how public sector pay can vary from region to region - in line with pay in the private sector - and present him with recommendations by July.

At the same time, Francis Maude, the Minister for the Cabinet Office, is to look at ways of introducing regional pay for civil servants employed directly by central government.

In his Autumn Statement, Mr Osbrone said: "This is a significant step towards creating a more balanced economy in the regions of our country that does not squeeze out the private sector."

Treasury Minister Chloe Smith provided more detail in a recent Commons debate, and warned that rather than simply setting pay scales on a regional basis, Ministers hope to introduce local deals within each region.