Public sector workers across the Midlands face years of further pay freezes after the Chancellor announced he was pressing ahead with plans to introduce local pay rates.
Ministers want to abolish national pay agreements to ensure public services aren’t paying more for staff than private employers.
It will mean that workers in some part of the region are paid less than others, with central Birmingham pay rates likely to be higher than those in the outskirts of the city or the Black Country.
Rather than cutting pay, workers on lower salaries will be told that a pay freeze introduced by the Government for two years in 2012 is to be extended.
But that means they actually face pay cuts, once the effect of inflation is taken into account.
George Osborne, the Chancellor, announced that local pay agreements could come into effect by the end of the year.
He said: “We’re also looking to see whether we can make public sector pay more responsive to local pay rates.”
He added: “Some departments will have the option of moving to more local pay for those civil servants whose pay freezes end this year.”
Speaking to The Post following the announcement, Business Secretary Vince Cable stressed that the policy was not about paying different salaries in different regions. Rather, local pay agreements would be introduced within regions.
The Lib Dem minister said: “Within your region there are big disparities between areas that are extremely prosperous and high wage and some that have the opposite. It’s about local settlements and local flexibility.”
Conservative Treasury Minister David Gauke said high pay in the public sector made it harder for private firms to recruit staff. He said: “It is important that throughout the country we have a strong thriving private sector. Where there is a risk of the private sector being crowded out then we need to look at it.”
Studies had found that in some parts of the country public sector workers were paid up to 18 per cent more than private sector staff doing similar jobs, he said.
“That is clearly going to have an impact on the ability of private sector firms to attract the workforce to work for them.”
But salaries were unlikely to be cut in cash terms. Rather, they would be frozen, he said, although this does mean a cut in real terms once inflation is taken into account.
Unions attacked the announcement, warning it would drive down wages in the poorest areas of the country.
TUC general secretary Brendan Barber said: “It’s not public sector pay rates that are stopping the private sector from creating jobs – it’s our stagnating economy, a lack of money being lent by the banks for firms to invest, and consumers who are too worried about losing their jobs to spend.
“Picking the pockets of public servants outside London and the South East by localising pay will simply widen the North-South divide, and cause more businesses to fail.”