Power to the People by Glen Jenkins

There will be some tough decisions to make in next month’s spending review. And no doubt, as part of the review of departmental spending and in order to make sufficient cuts, public sector pay will be one of the issues at the top of the agenda. The central question for the spending review according to the coalition will be, “Will it put more power in people’s hands?” However, there is one area of public sector pay that may be more of a sticking point for many departments who are seeking to meet this objective.

Indeed, one of the earlier Conservative solutions to public sector pay reform, the creation of independent Pay Review Bodies (PRBs), may be considered one of the most successful policies of the Thatcher era.  PRBs decisions on pay cover 26 percent of public sector workers including a large number of professional groups such as the armed forces, doctors and dentists, nursing and other health professions, prison service staff, school teachers and senior staff in the public sector. The pay awards to these groups are derived from rigorous comparative research on internal and external labour markets, together with judgments about the validity of stakeholder arguments whether government, employer, trade union or other party. Contrast this with recent comparisons along the lines of “if private sector pay has to be cut, so should public sector pay be cut”.  

From the PRB research, recommendations on pay are presented to the government. Whilst the recommendations are not binding on the government of the day, invariably in more prosperous times, the government has acceded to their requests even when the recommended pay increases has resulted in exceeding government spending limits. When governments didn’t agree to the request e.g. introducing phased pay awards instead, PRBs were particularly critical of government. In practice, rejection of the recommendations has been extremely rare and viewed as counterproductive by previous governments. Will this spending review change this? For those departments that are ring fenced from the cuts, e.g. health, PRB recommendations on pay may be given a thumbs up but for others, fiscal pressures will make things far more interesting.

Not only that, since 1983, PRBs have been relatively successful in managing pay expectations in the public sector, working flexibly alongside collective bargaining and perhaps more importantly in preventing manifest conflict over pay by maintaining, through a corporatist framework, the principle of equity or fair comparisons. Despite these advantages, maintaining pay review bodies provides more support for an increased role for the state at a time when the ‘big society’ agenda is to devolve power to the people. Their maintenance also goes against “reversing decades of over-centralization” of pay in the public sector or the increasing move to more market led reforms.

Furthermore, if the coalition government maintains the position of its predecessors and implements the recommendations of PRBs, the outcomes will be used as fair comparisons by other public sector workers in their negotiations. If it does not, the advantages noted above may be lost.  If it abolishes them, will power be given back to the people to determine their own pay and conditions?