Wednesday, March 04, 2009

Pay Apartheid

Defending the public realm

David Frost, director general of the British Chambers of Commerce, puts it in a nutshell:

"Across the country I am hearing more and more businesses left with no choice but to freeze and cut pay. It is unacceptable that the public sector should not share any of this pain. There is already an apartheid between the public and private sectors on pensions. We cannot have apartheid on pay too."

The Times adds :

"Under three-year public-sector pay deals agreed last year, NHS workers will enjoy pay rises of 2%-3% this year and next. Similar deals were awarded to teachers and the police, while local government workers are seeking a 6% pay rise."
This isn't just a provocation to all those anxious private sector workers teetering on the edge - there's also the question of affordability.

With the public sector pay bill currently running at about £160bn pa, every 3% pay increase is another £5bn pa. Two year's worth of 3% pa increases compounds to £10bn pa. By the end of the second year the cumulative cost is £15bn - money our parlous public finances simply cannot afford.

The outcome of course will not be more money for the public sector, because there isn't any more money. The outcome will be service cuts. Just this morning, following an Acas ruling in favour of a higher pay deal for council workers, the chairman of the Local Government Association said: “We are not prepared to pass this on to council taxpayers so it will be jobs that have to go.

And then there's the thorny issue of fat cat pay in the public sector.

It wasn't so long ago that the determinedly centrist* TaxPayers' Alliance was being lambasted by the Prog Con for publicising high pay in the public sector. But now everyone agrees there's a problem. Last week, Labour's local government minister John Healey pledged to change the rules, arguing:

"We've seen in some councils' salaries spiralling, we've seen some big pay-offs for failure, and that can't go on."
Even Prog Con stalwarts at Society Guardian are getting the message:
"Some town hall salary packages... appear obscenely high. But then so do less-publicised salaries in other realms of the public sector, neatly documented by the rightwing* lobby group, TaxPayers' Alliance."
Ah, but for every Prog Con that repenteth, another remaineth mired in denial. Here's Pol:

"When the private sector catches cold, the heat is turned up on everything public. "Don't bank on a pay rise (unless you work in the public sector)" said yesterday's Daily Mail, with the Murdoch/Rothermere/Barclay brothers press all in tune with the CBI and the TaxPayers' Alliance. Labour is rattled, and ministers run with the hounds instead of standing their ground to defend the public realm."
I always love the way Pol weaves her opponents into a capitalist conspiracy working to undermine "the public realm" - it really tells us what goes on inside her head. Evil press barons, fat cigar-chomping bosses, shadowy organisations of right-wing zealots, and the Master of Foxhounds: it's all straight out of Sir Roderick Spode and the 30s class war, as recounted by PG Woodhouse. Only Woodhouse meant it as humour.

Anyway, her point is that the public sector deserves its coming pay rises because it needs to catch up:

"In boom times the public sector tends to fall behind, but in recessions it catches up, in a counter-cyclical pattern... Gordon Brown screwed down the public sector to below-inflation pay for three consecutive years - which can hardly be called feather-bedding."

A screwing from Gordon Brown on a feather-bed? An horrific image that may be inside Pol's head, but which I certainly don't want inside mine. Let's blot it out with some facts.

The facts are that over the last three years (to December 2008), average earnings in the private sector increased by 3.7% pa. Whereas in the public sector they increased by 3.5% - a 0.2% pa difference. That doesn't sound like much of a screwing, especially when you consider that private sector pay may now be falling.

In reality, as we've blogged many times, the official stats show that overall public sector pay compares well with the private sector. Here are some headlines (all figures relate to full-time gross pay, including bonuses, in 2008):
  • Average pay - £582 per week in the public sector, compared to £574pw in the private sector - so the public sector is marginally ahead

  • Median pay - £523pw public sector, compared to £461pw in the private - so the typical public sector worker is 13% ahead

  • Pay increase since 1997 - median pay in the public sector has increased by 49.6%, compared to 48.8% in the private sector - so once again the public sector is marginally ahead

And here's another interesting thing: since the People's Party has been in power, pay increases in the public sector have kept up with, or exceeded, those in the private sector right up the pay scale - even at the top.

Why is that interesting?

Because defenders of the public realm have long complained that fat cats curled up at the top of the private sector tree have been rinsing their pay increases. Whereas honest hard-working top moggies in the public sector have lived on a meagre diet of household scraps.

The truth is that pay for the top decile of the public sector has increased by virtually the same percentage as that for the top decile in the private sector (57.9% vs 58.5%). And both have done much better than their underlings:

Can that be right? How can the spirit of public service accommodate such naked fat cattery?

Pol has an explanation:

"Council chief executives, heads of quangos and of foundation hospitals, have been infected by the high-pay virus of our times. When pay went mad it was hard to insulate the public sector, housing associations or large charities from the insanity. Headhunters deliberately inflated pay, persuading these outfits to poach top players from a tiny pool of people already in such jobs."

Wouldn't you just know it - the egregious money-grubbing antics of our public realm defenders turns out to the fault of private sector headhunters.

You might want to remember that as you pay your taxes to pay for the forthcoming public sector pay increases.

*Footnote: It is highly gratifying that the TPA has now achieved the prominence to be demonised by the Prog Con as a far-right danger to the public realm. As far as Tyler is concerned, it remains the centrist voice of reason in turbulent times.

PS Defending the public realm? Let's just remind ourselves where Pol got the idea:

"This royal throne of kings, this scepter’d isle,

This earth of majesty, this seat of Mars,

This other Eden, demi-paradise,

This fortress built by Nature for herself

Against infection and the hand of war,

This happy breed of men, this little world,

This precious stone set in the silver sea,

Which serves it in the office of a wall,

Or as a moat defensive to a house,

Against the envy of less happier lands,

This blessed plot, this earth, this realm, this England."

How dare she subvert our heritage.


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