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Local pay would save £6.3bn – Policy Exchange

The introduction of regional pay could save the taxpayer £6bn a year, the think tank Policy Exchange has stated in a new report.

Chancellor George Osborne raised the prospect of local pay in the March Budget, but the proposal has been met with much controversy by unions and workers.

The report suggests the average public sector worker is paid 7% more than their private counterparts, rising to 14% when pensions are taken into account. Bringing the levels of pay into line could save the taxpayer £6.3bn, Policy Exchange said.

The think tank argues that the current system is unfair to workers living in areas with higher costs of living and prevents employers from attracting the best staff.

Matthew Oakley, co-author of the report and a former Treasury adviser, said: “Moving to a system where local public sector employers can decide how to negotiate salaries with employees will enable top-performing public sector workers to be paid more, increasing productivity and improving public services.

“Not a single penny would leave poorer regions. The money would be ploughed back into reducing unemployment and boosting growth in the poorest parts of the country.”

But public sector unions attacked the report. Dave Prentis, the general secretary of Unison, said: “Robust independent evidence published only last week shows that the central arguments for regional pay are false.

“Attacking public sector pay, under the banner of fairness, is a misguided short-term fix to a much bigger problem – our floundering economy.” 

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