Tough choices ahead when it comes to pay


I dont envy George Osborne.  The gap between private and public sector pay is widening and the private sector shows no sign of taking up the slack as the necessary public sector cuts peer over the horizon.

A feature of the recession has been the private sectors willingness to take the pain.  I remember being at a business dinner in 2009 where the speaker thanked KPMG for turning up on their day off.  It was a Friday, rather than announce wholesale redundancies KPMG had announced plans for four day week to be offered to employees.  I believe the plan was a 20% cut in attendance for a 10% cut in pay, the number crunchers having worked this out to be more cost effective than redundancies.  Part of this was driven by long memories.  Of equal importance (all credit KPMG and many like them) was the sense that come the upturn it was critical to hold on to the talent required to take full advantage of the opportunities presented.  Having cut to the bone in the recession of the early nineties, it took so many of accounting firms years to refill the talent pool necessary to deliver customer need.  KPMG remembered this and were not prepared to let lightning strike twice.  Hold on to the good ones, engage with them, make them feel part of the family, but by any means hold on to them.  There are countless similar private sector examples.  The same cannot be said of the public sector.

This week alone we have in excess of 170 public servants earning salaries in excess of the prime minister.  A nonsense but that would be those fat cats on final salary pensions running many of the UK’s most eminent institutions?  Maybe, but across the public sector there is a culture of excess that is only this week evidenced by the Reed Job Index.  In the private sector in May 2010 starting salaries for workers taking new jobs fell by 3 per cent, despite the rising cost of living.  In the first quarter of 2010, public sector pay, excluding bonuses, rose by 4 per cent.  This despite the words of Liam Byrne, the outgoing Chief Secretary to the Treasury who left a note to his successor “There is no money, good luck”.

Public sector workers earn 7% more on average than their peers in the private sector — a pay gulf that has more than doubled since the recession began.  I appreciate that it is easy to beat up on public sector workers, an easy target in such tough times.  However I know at first hand the incredible job front line public sector workers do and selfishly have little self interest to be gained by such public sector bashing ( I am married to a paediatric nurse and my mother in law is a former district nurse).  However there has to be a willingness to share the pain with the private sector.  Certainly not to the detriment of front line services, where every penny is earned (said not only to ensure Sunday Lunch is a safer affair for yours truly) but certainly amongst the swathe of managers and administrators and certainly amongst those who shamefully we allow to earn more than the person running the country.  I want the very best running public services, but if money is the motivator get back in to the private sector.  George you have some tough choices ahead.  Its going to take real leaderhip to push them through to ensure long term economic prosperity for the UK.

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