Equitable solutions to the deficit are largely exercises in wishful thinking. Poor people face a double whammy. They pay a larger proportion of their income in tax than the better off and so will be hit hardest by tax rises. They are also more reliant on public services that face the chop. Even with the best of intentions it’s more or less impossible to ensure that cuts won’t create increase inequality in some way.
There are, however, some cuts that save money and don’t impact on public services. Unfortunately, for a large number of public servants, that includes cutting the public sector pay bill. One of the most equitable ways to do this is regionalise pay for the three-quarters of civil servants that work outside London. The Financial Times reports that exactly this proposal is now on the table. Putting aside the concern of the public sector unions for their members’ pay packets, which they’ll rightly seek to protect, the principal economic objection is that this measure would depress demand in some areas with few other sources of growth.
It must also be said, however, that with pay and conditions of civil servants outstripping private sector pay by 5 cent for men and 11-13 per cent for women in the regions, making government salaries less attractive could help encourage some people into value creating jobs in the private sector. This thinking could even be extended into regionalised benefit payments as Stephen Greenhalgh has proposed in his Magna Carta for Localism. But while that may make sense to a wonk like me, I think that proposal is a political bridge too far for even a truly radical government.
