Regional Pay

I congratulate the hon. Member for East Carmarthen and Dinefwr (Adam Price) on introducing this wonderful, interesting and timely debate. It is certainly a live issue in London, as it is in the regions, which is evidenced by the fact that about 50 per cent. of the Welsh nationalists and 20 per cent. of the Scottish nationalists are in the Chamber today.

I want to touch on a number of the issues that have been raised by the hon. Gentleman, and I should be interested to get some clarification from the Economic Secretary as to the thinking of the Chancellor of the Exchequer on these matters, because the statement a couple of weeks ago did not make it clear precisely what was intended, and I suspect that quite a lot of water will have to flow under the bridge before we fully appreciate what regional pay bargaining may mean in the months and years ahead.

The hon. Member for East Carmarthen and Dinefwr made a lively speech. Last year, we went to America and saw how regional and federal government worked there. That was an eye-opener for me – and, I think, for the hon. Gentleman. There is a suggestion that we might take one step forward and try some kind of federalisation as far as the funding is concerned. This debate goes beyond the narrow aspects of pay differentials within different regions to the regional government that is being put in place by the current Labour Administration. We already have a Scottish Parliament, a Welsh Assembly and a level of devolution – although a narrow level – in London, and if we had regional government across the whole of England this sort of debate would be had almost daily.

I hope that you, Mr. Benton, and the hon. Member for East Carmarthen and Dinefwr will forgive me if I focus most of my comments on central London, because there are some distinct London factors. I was amused to hear the hon. Gentleman’s suggestion that a change in the current regime would amount to a cross-subsidy from the poorer areas to the richer areas. I think that the hon. Member for Finchley and Golders Green (Dr. Vis) will agree that London Members feel that there is already a lot of cross-subsidy, but that it goes in the wrong direction: London contributes £20 billion a year to the regions as a whole, but it has an increasingly beleaguered public sector, and housing and many other things are unaffordable.

One need only look at a map of the United Kingdom, and at the far-flung rural constituencies that are in Wales and Scotland, to understand my next point. The whole of greater London – which has 74 constituencies- could probably fit within East Carmarthen and Dinefwr. For that reason, it is a much more localised market. Travelling is an everyday part of life for people who live and work in Greater London, but many who live in the poorer boroughs will work only five or six miles away, in much wealthier areas.

I turn to my own perspective. I suspect that the poor Economic Secretary will find himself beleaguered on all fronts. I am also critical of the Government although, I suspect, from the opposite side of the political divide from the hon. Member for East Carmarthen and Dinefwr. It seems to me that, in essence, there is an unholy alliance between a Government who are dominated by Scottish and northern English Members of Parliament and their trade union friends, which has resulted in a rapid diminution in the quality of life of many Londoners, who find that their hospitals, schools, police and other public services are increasingly denuded of staff because it is impossible for them to live in or even near central London.

The current system of national pay bargaining may suit the Labour party and its friends in the trade unions but it is something of a disaster for many of London’s workers and residents, whom I represent. There is a very inadequate system of London weighting. Often, that amounts to as little as £3,000 a year, which utterly fails to take account of the big differences in the quality of life and cost of living between London and other cities. On graduating, a junior teacher will earn £2,000 or £3,000 more for working in a central London school – and therefore being expected to live in Greater London, or perhaps just outside it in the home counties – than a teacher in Sunderland or Liverpool. That takes no realistic account of the substantial differentials in the cost of living between those areas.

I was very interested to hear what seemed to many of my constituents to be warm words from the Chancellor on the differentials and the cost of living. My main concern was to know where and, more important, when the baseline would be drawn. As the hon. Member for East Carmarthen and Dinefwr said, there is a specific problem for London. Although I accept that the world does not start and end in London, as a representative of this constituency it might be understandable if I took a contrary view.

There is a problem that is specific to London that should not necessarily be thought of as extending into the south-east. Over the past 10 or 15 years the differentials to which the hon. Gentleman referred have, without a doubt, become ever greater between both 
private and public sector workers in the capital. Moreover, the problem of the cost of living faces both public and private sector workers.

Dr. Vis : Would the hon. Gentleman extend London weighting to pensions?

Mr. Field : I am sure that if I attempted to go down that track you would rule me entirely out of order, Mr. Benton. Nevertheless, the hon. Member for Finchley and Golders Green has allowed me a few more seconds of thinking time. I am sure that we shall discuss that matter in the months and years ahead.

It strikes me that pay scales alone need to mirror to an extent the private sector, in which wages take account of regional variations in the cost of living and the quality of life – that is an integral part of living in London.

There are always unholy political alliances on this matter. I have some sympathy, on this narrow point alone, with the Mayor of London. Those are not words that I will utter too frequently. There is a sense that the Chancellor should be paying up. We have seen this year the gerrymandering of the funding formula for local government. Westminster city council is not a typical local authority; for example, its uniform business rate raises some £850 million a year – almost £1 billion – and yet only £72 million is returned to it from central Government. I appreciate that that is a slightly unfair comparison, because it is by no means typical, but many London authorities feel that they are paying an enormous amount of money into central coffers and seeing little in return.

Adam Price : Would the hon. Gentleman not accept that many of the problems that he mentioned surrounding public sector workers in London could be addressed through a more generous pay settlement overall? I know that he loves America very much. In that country public sector workers throughout the land get a premium of 15 per cent., on average, over private sector workers. Would not such an approach deal with the problem in London and the south-west, and in other areas?

Mr. Field : I confess that I spent the first 18 years of my working life in the private sector, running my own business. Of course, having joined the public sector in the past two years, my perspective is somewhat different from the one that I might have had in the previous decade and a half. My instinct is that we need to give some sensible thought to how the public sector is rewarded. Some fundamental regional differences must be taken into account.

I am sure that the hon. Gentleman would agree, given his perspective on the lack of powers of the Welsh Assembly, that the fundamental issue is that the UK is a highly centralised country, not least in terms of financing. We were all well aware of things before the secret notes of that famous Granta restaurant meeting some nine or 10 years ago came to light. It is quite clear that centralisation has become ever more prevalent. I accept that such criticism could equally be planted against my own party, whose 18-year Administration came to an end in 1997. Ultimately, the real issue is the enormous power in the hands of the Chancellor of the Exchequer as far as the finance is concerned. We can debate the projects that are close to our hearts – be they infrastructure projects in Wales or London – until the cows come home, but it will make relatively little difference until a proper finance-raising power is in the hands of locally elected politicians. 
I want to consider affordable housing, which the hon. Member for East Carmarthen and Dinefwr touched on, in more detail. Affordable housing has been a major issue in London over the past few years. Affordable housing schemes are insufficient. Indeed, by giving the impression of action on the differentials between the public and private sectors, and the differentials within the UK, they can be counter-productive.

The Mayor of London betrayed his almost total ignorance of economics with his plan to insist that 50 per cent. of all new development be affordable housing. The London economy has begun to slow down ahead of the game compared with many other parts of the UK, and developers are simply sitting on their hands. In the past year or two, there has been evidence that large scale development projects have gone on hold and that developers are taking the view that they will wait until the economy starts to pick up rather than run the risk of having to build 50 per cent. affordable housing on any land that they want to develop.

In my constituency, it is clear that the costs of even the most modest housing, such as former local authority housing, are astronomical. Even private sector workers in the City of London are unable to get a foothold on the property ladder and many of them must move into the suburbs or even beyond. London house prices are nothing new, and it is fair to say that any booming city requires a booming property market. When the property market begins to fall it is a clear indication that an economic downturn is on the way.

When it comes to affordable housing, key workers must include many of those in the private sector because the divide is not only between the private and public sectors. Shopkeepers and caretakers are part and parcel of the glue of a local community. Anyone who represents an urban constituency will realise that we must maintain those community values. Above all, key workers need a free market, which means comparable pay rates for London public sector workers.

I support the hon. Gentleman in securing the debate. He will appreciate from my comments that we agree on less than we might, but the issue is none the less important and will vex us during much of our political lives. I look forward to hearing the Economic Secretary give us an indication of the Chancellor’s thinking. I can appreciate why the notion of local pay bargaining has caused such concern, but we must have some more meat on the bones to determine precisely how the policy will operate. From a London perspective, I should be interested to know whether regional pay would be backdated to ensure a baseline, which would mean a significant cash injection for those London public sector workers who currently find themselves in such difficult straits.