The government wants to be seen as on the side of necessary but fair reform; facing down opponents who believe in ‘something for nothing economics’. Public sector unions, with their desire to protect pensions that are far more generous than those on offer in the private sector, are ideal opponents in the eyes of coalition strategists.
On Tuesday, George Osborne chose to raise the stakes in this battle. He announced that he was asking ‘the independent pay review bodies to consider how public sector pay can be made more responsive to local labour markets’. This dull-sounding proposal is hugely significant. The abolition of national pay rates would mean the end of national pay bargaining and destroy the main purpose of national trade unions. Like all of Osborne’s policy decisions, this move has to be seen as part of his plan to create a new Conservative majority. The Chancellor is determined to use structural reforms to tilt the political and economic balance of the country to the right.
At the moment, the fact that public sector workers in Cleethorpes are paid the same as those in Cheltenham means that in large swaths of the country the best-paid jobs are in the public sector. This has created what the Local Government Secretary, Eric Pickles, calls ‘the new establishment’: people who are among the wealthiest in their community but have an interest in an ever-growing state. They are unlikely to be receptive to the messages of the small state party.
Another benefit of this move is that it should encourage more people into the private sector in parts of the country where up to now the state has provided the most lucrative and secure employment. As one senior Tory says, ‘You create a bigger private sector, you create more Tories.’ Indeed, it is worth remembering that the overall Osborne plan is meant to lead to 1.7 million more private sector jobs and 710,000 fewer public sector ones. And more is being done to make the public sector less attractive compared to the private sector. Osborne also announced that the public sector pay freeze will be followed by two years where pay will only rise by 1 per cent.