Public sector pay deal 'will enshrine West's low wages'

Liberal Democrat MPs are threatening to divide the Government over plans to localise public sector salaries against fears the Westcountry could be hit hard.

Chancellor George Osborne is examining moving towards local pay scales next year, meaning nurses, teachers and millions of public sector staff would no longer be on the same wage regardless of where they work.

Ministers argue the state pays higher wages than the private sector in poorer parts of the country, which suppresses the availability of labour for companies and damages the economy.

But critics, notably unions and Labour backbenchers, have warned of wages being driven down, which would hurt areas reliant on the public sector.

Low-wage Devon and Cornwall, which has around 200,000 public sector workers, could be among the regions worst hit.

Now Lib Dems have voiced their concern with the proposals that have been broadly welcomed by their senior coalition partners, the Conservatives.

Adrian Sanders, Lib Dem MP for Torbay, said the idea "must be resisted" because it would "make everyone poorer in the peripheral parts of the UK", especially in the far South West.

Mr Sanders said the mechanism would have the opposite effect to that intended, and would suck money out of poorer areas.

"There will be an impact that lower public sector salaries will have on a local economy, and the knock-on effect they have lowering private sector pay, further reducing the amount of money circulating," he said.

Andrew George, Lib Dem MP for St Ives, said the idea was "stupid" and would "worsen" the problem of endemic low wages in poor areas such as Cornwall.

"If they are trying to bring the regions up with this it will be entirely counterproductive," he said. "I think it will enshrine places like Cornwall at the bottom of the earnings table."

Mr Osborne has written to the six major pay boards, asking them to draw up plans by July on how the new system should work.

The armed forces, dentists and doctors will be excluded from any deal, which could be based on a local-pay scheme introduced by the Labour government for courts staff.

Ministers have insisted local pay would not simply conform to regional. Exeter, Newcastle and Norwich could be in the same pay band, it has been suggested.

Government sources have suggested the plan could work by dampening down pay, meaning cuts to wages would not be made but pay frozen for a number of years.

Ben Bradshaw, Labour MP for Exeter, has said the move would be "devastating in the South West".

Even Tory MP for Tiverton and Honiton Neil Parish says he is "not sold on it one way or another".